Adjusted Income – NBC Institute

TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships

Computation of adjusted income and chargeable income for partners in a firm with adjustments for disallowable expenses.

Question

Muyiwa, Seyi, and Akpan are partners in an accounting firm in Lagos, Museak & Co (Chartered Accountants). The Statement of Profit or Loss for the year ended December 31, 2015, is shown below:

Additional Information:

Donation was for laying the foundation of a new church.
Repairs for Muyiwa’s wife’s vehicle, costing ₦550,000, were included under repairs and maintenance.
Medical expenses of ₦500,000 were incurred for flying a partner’s father-in-law abroad.
Akpan contributed ₦500,000 under the Pension Reforms Act 2004 (as amended).
Capital allowances agreed with the tax authority were ₦4,000,000.
Partners’ profit-sharing ratio: Muyiwa 6; Seyi 4; Akpan 2.

Required:

Compute the adjusted income of Museak & Co for tax purposes. (6 Marks)
Compute the chargeable income of each partner. (6 Marks)
Compute the tax payable by each partner. (8 Marks)

Answer

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Tags: Adjusted Income, chargeable income, Distributable Income, Partnership Income
Level: Level 2

Topic: Taxation of Partnerships and Sole Proprietorships
Series: MAY 2017

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

Question

a) Obi Consults is a civil engineering consulting firm of many years. The founding partners are Bibi, Kose, and Fowora. The financial year-end of the firm is December 31 each year. The following information was extracted from the partnership’s financial statements/records for the year ended December 31, 2018:

Details	Amount (N)
(i) Net profit for the year	21,575,000
(ii) Provision for depreciation	13,250,000
(iii) Fine paid for traffic offence	25,000
(iv) Donations to “politicians in business”	150,000
(v) Donation to National Library Board	165,000
(vi) Profit from sale of excavator	1,600,000
(vii) Capital allowances	6,575,000
(viii) Balancing allowance	677,000
(ix) Balancing charge	1,315,000

Additional information:

Profit sharing ratio: Bibi – 1/2, Kose – 1/4, Fowora – 1/4
Bibi and Fowora are entitled to 5% interest per annum on a loan of N10,500,000 each. Fowora’s loan was refunded fully on his retirement.
Salaries paid: Bibi – N10,800,000, Kose – N8,250,000, Fowora – N8,250,000
Fowora retired on June 30, 2018, and Jaycee was admitted as a new partner on July 1, 2018, with an annual salary of N8,250,000. Jaycee introduced a loan of N7,000,000 on July 1, 2018, entitled to a 5% interest per annum.
The profit-sharing ratios after Jaycee’s admission: Bibi – 1/2, Kose – 7/20, Jaycee – 3/20

You are required to:
(i) Compute the adjusted/assessable income of the partnership. (5 Marks)
(ii) Determine the share of profits among the partners. (3 Marks)
(iii) Show relevant workings for prorated salaries and interest on loans, assuming simple interest. (2 Marks)
(iv) Compute the assessable income of each partner. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Income, Assessable Income, Capital Allowance, Partnership, Proration, Retirement, Tax computation
Level: Level 2

Topic: Taxation of Partnerships and Sole Proprietorships
Series: MAY 2019

TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships

Computation of adjusted income and chargeable income for partners in a firm with adjustments for disallowable expenses.

Question

Muyiwa, Seyi, and Akpan are partners in an accounting firm in Lagos, Museak & Co (Chartered Accountants). The Statement of Profit or Loss for the year ended December 31, 2015, is shown below:

Additional Information:

Donation was for laying the foundation of a new church.
Repairs for Muyiwa’s wife’s vehicle, costing ₦550,000, were included under repairs and maintenance.
Medical expenses of ₦500,000 were incurred for flying a partner’s father-in-law abroad.
Akpan contributed ₦500,000 under the Pension Reforms Act 2004 (as amended).
Capital allowances agreed with the tax authority were ₦4,000,000.
Partners’ profit-sharing ratio: Muyiwa 6; Seyi 4; Akpan 2.

Required:

Compute the adjusted income of Museak & Co for tax purposes. (6 Marks)
Compute the chargeable income of each partner. (6 Marks)
Compute the tax payable by each partner. (8 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Income, chargeable income, Distributable Income, Partnership Income
Level: Level 2

Topic: Taxation of Partnerships and Sole Proprietorships
Series: MAY 2017

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

Question

Details	Amount (N)
(i) Net profit for the year	21,575,000
(ii) Provision for depreciation	13,250,000
(iii) Fine paid for traffic offence	25,000
(iv) Donations to “politicians in business”	150,000
(v) Donation to National Library Board	165,000
(vi) Profit from sale of excavator	1,600,000
(vii) Capital allowances	6,575,000
(viii) Balancing allowance	677,000
(ix) Balancing charge	1,315,000

Additional information:

Profit sharing ratio: Bibi – 1/2, Kose – 1/4, Fowora – 1/4
Bibi and Fowora are entitled to 5% interest per annum on a loan of N10,500,000 each. Fowora’s loan was refunded fully on his retirement.
Salaries paid: Bibi – N10,800,000, Kose – N8,250,000, Fowora – N8,250,000
Fowora retired on June 30, 2018, and Jaycee was admitted as a new partner on July 1, 2018, with an annual salary of N8,250,000. Jaycee introduced a loan of N7,000,000 on July 1, 2018, entitled to a 5% interest per annum.
The profit-sharing ratios after Jaycee’s admission: Bibi – 1/2, Kose – 7/20, Jaycee – 3/20

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Income, Assessable Income, Capital Allowance, Partnership, Proration, Retirement, Tax computation
Level: Level 2

Topic: Taxation of Partnerships and Sole Proprietorships
Series: MAY 2019

Question Tag: Adjusted Income

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TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships

Computation of adjusted income and chargeable income for partners in a firm with adjustments for disallowable expenses.

Additional Information:

Required:

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships

Computation of adjusted income and chargeable income for partners in a firm with adjustments for disallowable expenses.

Additional Information:

Required:

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

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TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships

Computation of adjusted income and chargeable income for partners in a firm with adjustments for disallowable expenses.

Additional Information:

Required:

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TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

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TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships

Computation of adjusted income and chargeable income for partners in a firm with adjustments for disallowable expenses.

Additional Information:

Required:

You're reporting an error for "TAX – May 2017 – L2 – SB – Q3 – Taxation of Partnerships and Sole Proprietorships"

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

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