Reference no: EM132612395
Question - The audited accounts of Wilo Ltd. for the year-end 31st December 2020, show a loss of $6,800,000 after charging the following:
$
Depreciation 1,750,000
Legal fees 1,600,000
Donations 2,000,000
Bad debts 2,300,000
Foreign travel 1,300,000
Other Information:
a) Legal fees are as follows:
Expenses in respect of recovery of debts, $400,000
Expenses related to the increase of share capital, $1,200,000
b) The Bad debt expense is a percentage of debtors at year-end
c) The company made contributions of $800,000 to the University of the Commonwealth Caribbean and $200,000 to a football Club which has not registered under the Charities Act, 2013.
d) Foreign travel expense was a vacation package for the purchasing manager's family.
e) Included in revenue is the item - Refunds from Income Tax- $150,000
f) The capital allowance has been calculated at $600,000
g) The company is a private company with Ordinary paid up shares of $1 each $10 million and 10 % Preference Shares valued at $8 million. This is included in the accounting loss.
h) Net profit on the disposal of fixed assets during the year was $150,000 and is included in income.
i) Interest payable at 31 December 2019 was $200,000 and at the end of the current year is $500,000.
Required - Compute the adjusted profit/loss for tax purposes and the tax liability for 2020 at 25%.