Prepare a profit adjustment statement

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Reference no: EM132957276

Question: Albert Smith is a self-employed wholesale clothing distributor who began trading on 1 July 2011. His summarised accounts for the year to 30 June 2019 are shown below (figures in brackets refer to notes).

 

£

£

Gross profit

 

168.000

Wages and NIC (1)

55.200

 

Rent and rates

29.100

 

Repairs and renewals (2)

3.490

 

Sundry expenses (3)

1.375

 

Albert's own income tax and NIC

14.940

 

Bad debts (4)

820

 

Legal expenses (5)

1.060

 

Depreciation

850

 

Lease rental on Albert's car (6)

8.400

 

Loss on sale of office furniture

60

 

Gift aid donations (not allowable)

200

 

Transport costs

3.870

 

Interest (7)

1.150

 

Running expenses on Albert's car (8)

2.000

 

Lighting and heating

1.250

 

Relocation expenditure (9)

2.395

126.160

Net profit

 

41.840

Notes:
(1) Included in wages are Albert's drawings of £200 per week and his wife's wages of £16,570. His wife works full-time in the business.

(2) The charge for repairs and renewals includes £3.243 for fitting protective covers over the factory windows and doors to prevent burglary.

(3) Sundry expenses comprise:                   
• Theft of money by employee                      65
• Political donation to Green party                100   
• Gifts of 100 calendars                               500

(4) Bad debts comprise:
• Trade debts written off                                570
• Loan to former employee written off             250
                                                                   820
(5) Legal expenses comprise:
• Defending action re alleged faulty goods      330
• Cost re lease of new larger premises           250
• Defending Albert in connection with speeding offence 187
• Debt collection                                           293
                                                                   1.060

(6) Albert's leased car had a retail price of £20.000 and was leased from 1 July 2018 to 30 June 2019. The car has emissions of 119g/km

(7) Interest is as follows:
• Bank overdraft interest (business account)     860
• Interest on overdue tax                                130
                                                                    990
(8) Included in the charge for motor running expenses is £65 for a speeding fine incurred by Albert whilst delivering goods to a customer.

(9) The relocation expenditure was incurred in transferring the business to new and larger premises.

Capital allowances for the year to 30 June 2019 are £5,680. Albert also made contributions of £11,800 to a registered pension scheme during 2019/20.

Required:
(a) Prepare a profit adjustment statement in respect of the year ending 30 June 2019. showing the trading income for 2019/20. Start from the net profit figure of £41,840. Only include figures that need adjusting in your computation.

(b) Calculate the Class 4 NIC's payable by Albert for 2019/20

(c) Calculate Albert's income tax liability for 2019/20

Attachment:- UK taxation.rar

Reference no: EM132957276

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len2957276

8/4/2021 1:04:58 AM

1 Calculation and workings need only be made to the nearest £. 2 All apportionments should be made to the nearest month. 3 All workings where applicable should be shown 4 All names are intended to be fictitious

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