Kipande Ltd. is a Kenyan incorporated company. The following statement of comprehensive income of the company for
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Kipande Ltd. is a Kenyan incorporated company. The following statement of comprehensive income of the company for the year of income 2019
Sh. “000” | Sh. “000” | |
Gross profit | 59,000 | |
Less: | ||
Depreciation | 4,872 | |
Legal expenses | 508 | |
Loan Interest | 819 | |
Electricity | 378 | |
Salaries & wages | 9,387 | |
Telephone | 357 | |
Patent royalties paid | 756 | |
Travel expenses | 785 | 17,862 |
41358 | ||
Other Income | ||
Patent Royalties Received | 2,772 | |
Loan interest received | 193 | |
Dividend received from Shamba Ltd | 5,628 | 8,593 |
Net Income | 49,951 |
Additional Information
- Loan Interest paid included the following:
- Interest of sh.285,000 relating to a loan used to acquire shares of Shamba Ltd
- Interest of sh.258,000 relating to a loan to purchase office equipment
- Salaries and wages includes passage of sh.1,008,000 paid to a director who relocated to another country
- Travel expenses include sh.155,000 paid to a new employee hired from a foreign country
- Loan interest received relates to a loan issued to an employee of the company to purchase a residential house
- Not included in the other income was received of sh.1,638,000 from one lease, gross of loss of 397,000 made on another lease
- Operating loss of sh.189,000 had been carried forward for the previous eight years. The loss was included in the salaries and wages expense as at 31 December 2019
- Royalties of sh.145,000 were due for receipt as at 31 December 2019 but had not been recorded in the books
- Legal expenses included.
- Sh.176,000 paid on disposal of some property and equipment
Required
Explain the tax treatment of each item in the additional information with reference to the income tax act CAP 470.
Related Book For
International Financial Reporting A Practical Guide
ISBN: 978-1292200743
6th edition
Authors: Alan Melville
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