Ebanks, Brown, and Thomas are partners. They carry on a business jointly as EBT surveyors and share profits and losses in the ratio of 25:45: 30. The trading account profit as at 31 December 2021 was $6,500,000 after charging a nominal tax of $750,000. Notes: 1. The partners receive interest on their capital accounts at 9.5 % on the balance of their partner capital at the end of the budget year. The interest on the capital account was not included in the income statement. 2. Include in the income statement is $80,000 salary per month for each partner. 3. The partnership paid motor vehicle expenses for vehicles owned by the partners as follows: - Ebanks -$ 50,000 - Brown - $80,000 - Thomas - $130,000 The partners did not use the vehicles for the partnership business. 4. Profit on disposal was $180,000. 5. Depreciation on plant and machinery for the year was $900,000. 6. In recognition of the new IFRS 9 standard, a provision for bad debt of $75,000 was made. This represents a % of the business year-end receivable balance. 7. A portion of bad debt written off in 2020 for a debtor who was experiencing cashflow issues was paid. This amount was $270,000. This was not recognized in the 2021 income statement. 8. The business has the policy to write off small equipment valued under $100,000 in the income statement. For the year 2021, the total for small equipment written off in the income statement was $325,000. 9. The income incurred fines of $70,000 for breaching the Surveyor’s Board policies and rules. 10. As at 31, December 2021, the partners’ capital was Ebanks -$5,000,000, Brown $3,000,000 and Thomas $2,000,000. 11. PAYE of $200,000 was deducted from the salaries of each partner. 12. It is estimated that drawings by each partner was $500,000 per annum. 13. The business donated $450,000 to an entity on CTA ‘s approved list and $600,000 to a political party. 14. Brown received gross interest income on a fixed deposit at the bank accounting to $250,000. The tax deducted at the source was $ 6,250. 15. Ebanks receives a Net Rental income of $3,000,000 per annum. 16. Thomas received $7,000,000 for consultation services. 17. Details of the Fixed Assets: Details Cost NBV Tax Written Down As at 31 Dec 2021 As at 31 Dec 2021 Value as at 1 Jan 2021 Motor Vehicles 10,00,000 7,200,000 7,000,000 Equipment 15,000,00 12,00,000 6,713,335 Office buildings 45,000,000 36,000,000 36,450,000 - Included in the cost of a motor vehicle is a lorry purchased on 1 April 2021 for $2,000,000. 18. Included in the income statement interest relating $800,000 relating to a VAT refund in 2020. 19. Each partner paid a quarterly estimated tax of $600,000. 20. The business is within the first 3 years of trade. 21. The partners each contribute 5% of their taxable income to approved pension funds. 22. All currencies are in TT$. Required: Compute each person’s income tax payable/ refundable e for the year of assessment 2021 for each partner on the assumption that the business and the tax partners are tax-resident in Trinidad and Tobago. (Ignore all other statutory taxes, except National Insurance)
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Part A
Ebanks, Brown, and Thomas are partners. They carry on a business jointly as EBT surveyors and share
The trading account profit as at 31 December 2021 was $6,500,000 after charging a nominal tax of $750,000.
Notes:
1. The partners receive interest on their capital accounts at 9.5 % on the balance of their partner capital at the end of the budget year. The interest on the capital account was not included in the income statement.
2. Include in the income statement is $80,000 salary per month for each partner.
3. The partnership paid motor vehicle expenses for vehicles owned by the partners as follows:
- Ebanks -$ 50,000
- Brown - $80,000
- Thomas - $130,000
The partners did not use the vehicles for the partnership business.
4. Profit on disposal was $180,000.
5.
6. In recognition of the new IFRS 9 standard, a provision for
7. A portion of bad debt written off in 2020 for a debtor who was experiencing cashflow issues was paid. This amount was $270,000. This was not recognized in the 2021 income statement.
8. The business has the policy to write off small equipment valued under $100,000 in the income statement. For the year 2021, the total for small equipment written off in the income statement was $325,000.
9. The income incurred fines of $70,000 for breaching the Surveyor’s Board policies and rules.
10. As at 31, December 2021, the partners’ capital was Ebanks -$5,000,000, Brown $3,000,000 and Thomas $2,000,000.
11. PAYE of $200,000 was deducted from the salaries of each partner.
12. It is estimated that drawings by each partner was $500,000 per annum.
13. The business donated $450,000 to an entity on CTA ‘s approved list and $600,000 to a political party.
14. Brown received gross interest income on a fixed deposit at the bank accounting to $250,000. The tax deducted at the source was $ 6,250.
15. Ebanks receives a Net Rental income of $3,000,000 per annum.
16. Thomas received $7,000,000 for consultation services.
17. Details of the Fixed Assets:
Details Cost NBV Tax Written Down
As at 31 Dec 2021 As at 31 Dec 2021 Value as at 1 Jan 2021
Motor Vehicles 10,00,000 7,200,000 7,000,000
Equipment 15,000,00 12,00,000 6,713,335
Office buildings 45,000,000 36,000,000 36,450,000
- Included in the cost of a motor vehicle is a lorry purchased on 1 April 2021 for $2,000,000.
18. Included in the income statement interest relating $800,000 relating to a VAT refund in 2020.
19. Each partner paid a quarterly estimated tax of $600,000.
20. The business is within the first 3 years of trade.
21. The partners each contribute 5% of their taxable income to approved pension funds.
22. All currencies are in TT$.
Required:
Compute each person’s income tax payable/ refundable e for the year of assessment 2021 for each partner on the assumption that the business and the tax partners are tax-resident in Trinidad and Tobago. (Ignore all other statutory taxes, except National Insurance)
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Why is the salary figure in the income statement "600,000"? Is it the PAYE figure being used here?
Just looking for some clarity as the following was noted: "Include in the income statement is $80,000 salary per month for each partner".
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