Brick & Stone Income Statement for the year ended 31 December 2016 Notes $ $ Sales 2,500,000 Cost of Sales 1 1,100,000 Gross Profit 1,400,000 Expenses Salaries & Wages 2 760,000 Employer NIS Contribution 2,400 Rent and Rates 3 240,000 Insurance 50,000 Maintenance 120,000 Depreciation 4 55,000 Loss on Disposal of Vehicle 5 10,000 Telephone 6 35,000 Electricity 7 54,000 Utilities 70,000 Entertainment 8 100,000 Donations 9 85,000 Provision for Bad Debts 10 80,000 Fines and Penalties 11 15,000 Drawings 105,000 1,781,400 Net Profit/ (Loss) (381,400) Brick & Stone Notes to the Income Statement The Cost of Sales includes goods valuing $250,000 that were purchased for Mr. Stone’s personal use. Salaries and Wages include $25,000 per month, and $20,000 per month, paid to Mr. Stone and Mr. Brick respectively. $65,000 of the rent relates to the private dwelling of Mr. Brick’s wife. The rates of depreciation on the fixed assets of the business are below those given in the Wear and Tear Schedule of the Income Tax Act. The Wear and Tear allowance total 35 % of qualifying assets valuing $300,000. The partners agreed to dispose of an old pick-up truck with a net book value of $35,000 for $25,000. The pick-up had a tax written down value of $30,000 The telephone expense includes 20% for private calls made from Mr. Stone’s cellular phone. The electricity relates to the private dwelling of Mr. Brick. Entertainment expenses relate solely for the promotion of the business to new and prospective customers. Donations of $60,000 were made to a local political party to fund its campaign. The remainder was donated to an approved local children’s home. The partners could not determine if all of the customers would be able to settle their bills on time so a general provision of $80,000 was made to cushion the effect of the any debt going bad. Fines and Penalties include traffic offences of $5,000 and penalties $10,000 for non filing of VAT returns for the period January – March 2014. Note that the business was owned sole by Mr. Brick and registered in Trinidad and Tobago as a Sole Trading business in 2009. However, through continuous growth, Mr. Brick decided to enter into a partnership agreement with Mr. Stone, thus the status of the business was changed in 2014. The partnership agreement stated that the partners are to share profit and loss in the ratio 45:55 Brick and Stone Additional Information Mr. Stone is a director for a local company and receives gross emoluments of $250,000 per annum; payroll taxes amounted to $15,000 and are deemed to be correct. Personal allowance is $60,000 per individual Income Tax rate is 25%. Mr. Brick rents his private dwelling for $15,000 per month for 8 months with effect from May 1, 2015. The partners each paid estimated obligations of $10,000 per quarter on March 31, June 30, September 30, and December 31. Given the information provided, compute the adjustable profit of the partnership and the share of profit for the year ending 31 December 2016. Compute that tax liability of both partners Brick met in a motor vehicle accident and died January 1, 2017. Stone asked for your professional consultation on the business as a going concern. What would your consultation to Mr. Stone be?
Brick & Stone
Income Statement for the year ended 31 December 2016
Notes $ $
Sales 2,500,000
Cost of Sales 1 1,100,000
Gross Profit 1,400,000
Expenses
Salaries & Wages 2 760,000
Employer NIS Contribution 2,400
Rent and Rates 3 240,000
Insurance 50,000
Maintenance 120,000
Loss on Disposal of Vehicle 5 10,000
Telephone 6 35,000
Electricity 7 54,000
Utilities 70,000
Entertainment 8 100,000
Donations 9 85,000
Provision for
Fines and Penalties 11 15,000
Drawings 105,000
1,781,400
Net Profit/ (Loss) (381,400)
Brick & Stone
Notes to the Income Statement
The Cost of Sales includes goods valuing $250,000 that were purchased for Mr. Stone’s personal use.
Salaries and Wages include $25,000 per month, and $20,000 per month, paid to Mr. Stone and Mr. Brick respectively.
$65,000 of the rent relates to the private dwelling of Mr. Brick’s wife.
The rates of depreciation on the fixed assets of the business are below those given in the Wear and Tear Schedule of the Income Tax Act. The Wear and Tear allowance total 35 % of qualifying assets valuing $300,000.
The partners agreed to dispose of an old pick-up truck with a net book value of $35,000 for $25,000. The pick-up had a tax written down value of $30,000
The telephone expense includes 20% for private calls made from Mr. Stone’s cellular phone.
The electricity relates to the private dwelling of Mr. Brick.
Entertainment expenses relate solely for the promotion of the business to new and prospective customers.
Donations of $60,000 were made to a local political party to fund its campaign. The remainder was donated to an approved local children’s home.
The partners could not determine if all of the customers would be able to settle their bills on time so a general provision of $80,000 was made to cushion the effect of the any debt going bad.
Fines and Penalties include traffic offences of $5,000 and penalties $10,000 for non filing of VAT returns for the period January – March 2014.
Note that the business was owned sole by Mr. Brick and registered in Trinidad and Tobago as a Sole Trading business in 2009. However, through continuous growth, Mr. Brick decided to enter into a partnership agreement with Mr. Stone, thus the status of the business was changed in 2014.
The partnership agreement stated that the partners are to share
Brick and Stone
Additional Information
Mr. Stone is a director for a local company and receives gross emoluments of $250,000 per annum; payroll taxes amounted to $15,000 and are deemed to be correct.
Personal allowance is $60,000 per individual
Income Tax rate is 25%.
Mr. Brick rents his private dwelling for $15,000 per month for 8 months with effect from May 1, 2015.
The partners each paid estimated obligations of $10,000 per quarter on March 31, June 30, September 30, and December 31.
Given the information provided, compute the adjustable profit of the partnership and the share of profit for the year ending 31 December 2016.
Compute that tax liability of both partners
Brick met in a motor vehicle accident and died January 1, 2017. Stone asked for your professional consultation on the business as a going concern. What would your consultation to Mr. Stone be?
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