Riziki Insurance Company Ltd$.$ was incorporated in year $2019.$ The company deals with different classes of insurance. The following trial balance was extracted from the books of accounts as at $31$st December $2021$:

Sh$.$ Sh$.$

Property, plant and equipment $10,200,000$

Provision for depreciation $805,000$

Investment in government securities $1,200,000$

Gross premiums received from direct clients:

Motor vehicle $3,000,000$

Fire $2,500,000$

Commission on reinsurance accepted:

Motor vehicle $600,000$

Fire $200,000$

Commission on reinsurance ceded

Motor vehicle $700,000$

Fire $300,000$

Sundry receivables $750,000$

Bank balance $90,000$

Directors fees $495,000$

Reinsurance premiums paid:

Motor vehicle $400,000$

Fee $150,000$

Unearned premiums as at $1$st January $2021$:

Motor Vehicle $4,800,000$

Fire: $2,500,000$

Claims outstanding as at $1$st January $2021$

Motor Vehicle $1,100,000$

Fire $840,000$

Claim paid:

Motor Vehicle $2,770,000$

Fire $2,110,000$

Legal costs on claims

Motor vehicle $280,000$

Fire $130,000$

Sundry expenses on motor vehicle claims $220,000$

Provision for bad and doubtful debts

Motor vehicle $370,000$

Fire $320,000$

Management expenses:

Motor vehicle $450,000$

Fire $380,000$

Investment income $4,150,500$

Premiums returned: Motor vehicle $800,000$

Fire $700,000$

Profit and loss account $329,500$

$23,420,00023,420,000$

Additional Information

$1.$ Claims intimated and outstanding at $31$st December $2021$ amounted to sh$.750,000$ for motor vehicle insurance and sh$.480,000$ for fire insurance.

$2.$ Unearned premium is maintained at $80\%$ and $50\%$ of net premiums received for motor vehicle and fire insurance respectively.

$3.$ Investment allowances have been agreed with the commissioner at sh$.1,200,000$ for the year ended $31$ December $2021.$

$4.$ Investment income analysis: Sh$.$

Interest received from Government securities $2,040,000$ net

Interest received from local banks $760,500$ net

Dividend received from a Ugandan company $450,000$ gross

Dividend received from a local company $900,000$ net

$5.$ Fees paid to investment managers amounted to sh$.750,000$ for the year ended $31$st December $2021.$

Required:

Taxable income or loss for Riziki Insurance company and the tax payable for the year ended $31$st December $2021.(20$ marks$)$

Answer rating: 100% (QA)

Answer To calculate the taxable income or loss for Riziki Insurance Company and the tax payable for the year ended 31st December 2021 we need to follo... View the full answer