Richex Limited has provided the following profit and loss account for the year ended
31 December 2005:
Profit and Loss Account for the year ended
31 December 2005
Sh. Sh.
Opening stock
Purchases
Manufacturing expenses
Salaries and wages
Supplies consumed
General expenses
Interest on loan
Commission and brokerage
Director’s fees
Auditor’s fees
Taxes
Bad debts reserve
Depreciation
Managing directors
remuneration
Reserves
Provision for dividends
Profit for the year
524,000
4,692,000
2,563,000
252,000
466,000
85,000
364,000
90,000
55,000
70,000
43,000
296,000
648,000
126,000
750,000
300,000

21,000
11,345,000
Sales
Closing stock
10,584,000
761,000
________
11,345,000
The following additional information is provided:
1. Salaries and wages include Sh.20,000 contributed by the company to
unregistered pension scheme.
2. General expenses include Sh.15,000 for donation, Sh.10,000 for contributions
to a business pressure group that protects traders of the same kind.
3. Taxes represent VAT paid.
4. Bad debts (specific) are Sh.180,000.
5. The fixed asset schedule is as follows:
Asset Year Cost
Sh.
– Factory building
– Additional plant building
2000
2005
4,000,000
2,000,000 – brought to use 1 July

– Machinery
– New machinery
– Computers
– Other machinery and
furniture
2000
2005
2004
2000
4,800,000
6,000,000
1,000,000
640,000
2005
– fixed in new
building
– Year 2000 I.D rate = 60%
Required:
(a) Compute the capital allowances due to the company. ( 8
marks)
(b) Show the adjusted profit (loss) for tax purposes for the year 2005.
( 7 marks)
(c) State if any tax is payable. ( 1 mark)
(d) State the intervals relating to payment of tax instalments.
( 4 marks)