RCM ONLINE COLLEGE
PFT/POT CAT 2025-CPA,CIFA,ATD
QN 1. Mike Pompeo is employed by Nawiri Ltd as Finance Manager. During the year of income 2024, he provided
the following details relating to his income:
1.Basic salary per month of sh.182500. Monthly PAYE deducted by the employer was sh.47200
2.He Lives in a house provided by the employer and sh. 35000 is paid by the employer to landlord of the house per
month. The employer furnished the house at sh. 18000. The employer deducted 5% of his basic salary during the
year to cater for the rent.
3. He contributed sh. 15000 per month to a registered pension scheme while the employer contributed sh. 10000 for
him towards the same scheme.
4. He was reimbursed sh. 300000 for medical expenses incurred during the year. The scheme only covers employees
earning more than sh. 150000 per month
5. He was given sh. 60000 Per Diem for attending a 5- day seminar in Nakuru. This amount was to cater for his
accommodation and meals.
6. He has an education insurance policy for his children where he pays sh. 15000 as premiums per month
7. He is entitled to an annual bonus of 5% of his annual basic salary. The bonus was paid in December 2023
8. Benefits provided to him by the employer during the year include:
Commuter allowance sh.200000
Meals sh.75000
Telephone bills sh. 60000
Watchman Salary sh.120000
Required:
i) Mike Pompeo taxable income for the year of income 2024(10 marks)
ii) Tax liability if any (4 marks)
QN 2.
Gordon and Brown are in partnership business sharing profit and losses in the ratio 3: 2 for Gordon and Brown
respectfully after charging 10% as interest on their capital contributions.
The partners provided the following income statement for the year ended 31 December 2024:
Income Sh. 000 Sh. 000
Gross profit 7500
Interest on drawings 150
Discount received 112
Rental income 700
Profit on sale of old lorry 390
Expenses 8852
Impairment loss 340
Insurance and interest 490
Rent and rates 810
Depreciation 263
Commission to Blair 440
Purchase of saloon car 3500
Legal fees 670
Vat paid 1200
Repairs of rental property 510
Salaries and wages 1760
Medical expenses 978 (10961)
Net loss (2109)
Additional information
1. The partners capital contributions were sh. 3000000 for Gordon and sh. 1800000 for Brown
2. Salaries and wages include sh. 220000 and sh. 180000 paid to Gordon and Brown respectfully
3. Legal fees is made up of the following: Sh.
Renewal of 15 year Lease contract 200,000
Securing a bank overdraft 95,000
Defending Philip for breach of contract 180,000
Parking fines 50,000
Handling tax disputes 80,000
Collection of outstanding customer debts 65,000
4. Partners interest on capital was included in the insurance and interest expenses
5. Half of the medical bill was paid to Gordon during the year
6. 30% of the rent relates to amount paid to county government as rates in relation to partners own residential
houses
7. The interest on drawings relates to partners drawings during the year and should be apportioned as per the
sharing ratio.
Required:
i) Adjusted taxable profit for the partnership for the year ended 31 Dec 2024(12 marks)
ii) Allocation schedule of profit or loss calculate in c ( i) above(4 marks)
QN 3. GTL Ltd a manufacturer of Phones was established in December 2023. The company commenced its
operations on 1 January 2024 after incurring the following expenditure:
Sh.
Factory building 14,200,000
Warehouse 900,000
Staff canteen 780,000
Drainage system 400,000
Computers 500,000
Delivery van 1,800,000
Conveyor belts 680,000
Office furniture 250,000
Generator 350,000
Tractor 4,200,000
Processing machinery 3,800,000
Additional information:
1. A Godown was constructed and utilized from 1 July 2024. The total cost of construction was sh. 850000
2. A Sports pavilion and Labour quarters were constructed at a cost of sh. 650000 and sh. 1300000
respectfully. Both were utilized with effect from 1 June 2024.
3. A Parking bay was constructed and completed on 1 November 2024 at a cost sh. 580000
The factory building
4. ding comprised the following: Sh.
Retail shop 720,000
Dwelling house 600,000
Office block 280,000
Land 4,200,000
Required:
Investment allowance due to GTL Ltd for the year ended 31 December 2024(14 marks)
QN 4(A) Rirec Ltd is registered for Value Added Tax( VAT) purposes. The following transactions were recorded in
the month of July 2024. SH
July 4: Purchases of goods(Local) 4,640,000
July 6: Purchase of a computer 160,400
July 8: Returns outwards 130,000
July 10: Legal fees 60,400
July 12: Imports Cost, Insurance and Freight(CIF) 305,000
July 16: Sales( Local) 6,000,000
July 18: Export sales 600,000
July 20: Exempt sales 1,940,000
July 24: Printing and stationery 30,000
July 30: Electricity 55,000
Additional Information,
1. During the month, the import duty was at 20% on cost, insurance and freight (CIF) basis
2. A debtor of goods valued at sh. 125,000 was declared bankrupt on 24 July 2024
3. Input tax relating to goods sold as exempt could not be directly identified and it was found to appropriate to
restrict deductible input input tax
4. Transactions are inclusive of Vat where applicable
Required:
I) Output tax (3 marks)
II) Deductible input tax (5 marks)
III) VAT Payable or Refundable (2marks)
(B) Explain the Adam Smith canons of taxation (4 marks)
(C)Explain the following terrms as used in taxation
(I) Value Added Tax(2 marks)
(II) Tax point(3marks)
(III) Taxable Supplies(2 marks)
