Gat, Kie and Kan are partners, operating a supermarket in Downtown Miami.
They share profits and losses in the ratio 2:2:1 respectively. During the year ended 31
December 2005, the partners reported a loss of Sh.4,425,000 after deducting the
following:
Sh.
Interest on capital:

Gat
Kie
Kan
Salaries to partners:
Gat
Kie
Kan
Motor vehicle running expenses
Repairs and maintenance
Office expenses
Goodwill
Loss on investment
Postage and telephone
Water and electricity
Subscriptions to Kenya National chamber of
Commerce
Salaries and wages
Donations
Bad debts written off
Rent, rates and licences
Professional fees
Depreciation
Purchase of lorry
Dividend receive (Net)
Insurance recovery on motor vehicle
232,000
232,000
348,000
400,000
420,000
576,000
304,000
96,000
240,000
400,000
600,000
170,000
136,000
128,000
712,000
300,000
346,000
160,000
960,000
1,760,000
1,331,000
264,000
520,000
Notes:
1. Offices included cost of office cabinet of Sh.110,000.
2. Travelling expenses amount to Sh.12,000 per month related to personal use.
3. Provision for bad and doubtful debts account

Sh. Sh.
Bad debts
Specific (c/f)
General (c/f)
246,000
192,000
390,000
828,000
General b/f)
Specific (b/f)
Profit and loss account
330,000
152,000
346,000
828,000
4. Kie had taken goods worth Sh.70,000 for her own use.

The taxable profit (loss) from the partnership business and show the distribution
among the partners as at 31 December 2005 and tax payable thereon.
(25 marks)