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    KB 3 Model Question

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    Vinthuja Murukes
    The document provides information about MDH Ltd's income statement and additional details for the year ending 31 March 2019 to calculate the company's tax liability. It gives sales figures, expenses, other income sources, administrative and selling expenses details. It also provides information on property, plant & equipment additions and disposals, investment property sale, depreciation allowed and self-assessment tax paid. The required questions are to calculate the total tax liability and balance payable and state the capital gains tax payment due date.

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    KB 3 Model Question

    Uploaded by

    Vinthuja Murukes
    44 views3 pages
    The document provides information about MDH Ltd's income statement and additional details for the year ending 31 March 2019 to calculate the company's tax liability. It gives sales figures, expenses, other income sources, administrative and selling expenses details. It also provides information on property, plant & equipment additions and disposals, investment property sale, depreciation allowed and self-assessment tax paid. The required questions are to calculate the total tax liability and balance payable and state the capital gains tax payment due date.

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    Kb 3 Model Question

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    The document provides information about MDH Ltd's income statement and additional details for the year ending 31 March 2019 to calculate the company's tax liability. It gives sales figures, expenses, other income sources, administrative and selling expenses details. It also provides information on property, plant & equipment additions and disposals, investment property sale, depreciation allowed and self-assessment tax paid. The required questions are to calculate the total tax liability and balance payable and state the capital gains tax payment due date.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    44 views3 pages

    KB 3 Model Question

    Uploaded by

    Vinthuja Murukes
    The document provides information about MDH Ltd's income statement and additional details for the year ending 31 March 2019 to calculate the company's tax liability. It gives sales figures, expenses, other income sources, administrative and selling expenses details. It also provides information on property, plant & equipment additions and disposals, investment property sale, depreciation allowed and self-assessment tax paid. The required questions are to calculate the total tax liability and balance payable and state the capital gains tax payment due date.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

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    No. of pages: 04

    Business Level
    Business Taxation

    Model Question
    K
    B
    3
    Model Question on Tax Computation
    MDH (Pvt) Ltd (MDH) was incorporated in 2010 as a private limited company under the
    Companies Act No. 07 of 2007 with the objective of manufacturing electrical appliances for
    both the local and international markets.
    Extract of the forecasted income statement for the year ending 31 March 2019

    Rs. ʽ000
    Sales to local customers 138,150
    Export sales 646,450
    784,600
    Cost of sales (630,122)
    Gross profit 154,478
    Other income 5,920
    Administrative expenses (34,650)
    Selling and distribution expenses (13,423)
    Finance costs (9,865)
    Profit before tax 102,460

    Additional information
    (i) Break-up of other income

    Rs. ʽ000
    Dividend received from companies (net) 1,300
    Interest income on fixed deposits (net) 570
    Profit from sale of generator 220
    Profit from sale of land 3,830
    Total 5,920

    (ii) Administrative expenses include the following.

     In April 2018 a market survey was conducted by incurring a cost of


    Rs. 2,231,000.
    Based on the outcome of the market survey, an industrial research was carried
    out by a research institution in Sri Lanka by incurring a cost of Rs. 6,652,000. As
    a result of this, it was possible to improve the quality and character of the MDH’s
    products. This cost included laboratory equipment worth Rs. 1,400,000, which
    was purchased for the purpose of carrying out the industrial research.
    Except the asset acquired (laboratory equipment), all other expenses were duly
    charged to administrative expenses.

     Rs. 236,000 paid as a penalty for late payments to the employees’ provident
    fund.
     Book depreciation of Rs. 14,435,000.

    KB3 – Business Taxation Page 2 of 3


    Model Question
    (iii) Selling and distribution expenses include the following.

     Reimbursement of entertainment expenses of Rs. 632,000.


     200 garbage bins worth Rs. 850,000 donated by the company to the Municipal
    Council of the area.
     Donation to an approved charity that maintains the sick and needy of
    Rs. 100,000.
     Advertising cost of Rs. 63,000 incurred on a paper notice published for finding a
    buyer for the land.
     Rs. 1,000,000 paid as subscription for the professional body of engineers and
    Rs. 500,000 paid as subscription for the sports club of its employees.

    (iv) Property, plant and equipment

     Costs of additions during Y/A 2018/19.

    Rs.
    Laboratory equipment 1,400,000
    New generator 5,400,000
    Minibus to transport employees 6,340,000
    Car for the use of the managing director 4,200,000

     In May 2018, a generator was sold for Rs. 1,500,000. It was purchased in Y/A
    2016/17 for Rs. 4,800,000. In July 2018, a new generator was purchased at a
    cost of Rs. 5,400,000 to replace the old one.

    (v) Investment property

     On 15 August 2018 the company sold a bare plot of land for a consideration of
    Rs. 13,500,000. This land was purchased at a cost of Rs. 9,670,000 in 2000 and
    the market value of this land as at 30 September 2017 was Rs. 12,750,000. The
    company has paid relevant taxes on this transaction.

    (vi) Allowance for depreciation has been granted in full for all the assets held as at
    1 April 2018, except the assets disposed of during the year.

    (vii) All other expenses of the business are allowed for income tax purposes.

    (viii) The company has paid a total of Rs. 5,000,000 as self-assessment income tax
    payments for Y/A 2018/19.

    Required:

    (a) Assess the total tax liability and the balance tax payable by MDH for Y/A
    2018/19.
    (b) State the due date for the payment of capital gain tax on the disposal of the land.

    KB3 – Business Taxation Page 3 of 3


    Model Question

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