Project Five:

Project Five:

Task 1.1: Indirect Tax Liabilities For the merchandise sold:

 VAT Exclusive Price of Purchased Merchandise: Br 20,000,000

 VAT Inclusive Price of Sold Merchandise: Br 20,000,000

 Percentage of Merchandise Sold: 75%

To calculate the VAT collected, we need to find the VAT rate. Assuming the standard VAT rate is 15%, we
can calculate the VAT on the sold merchandise.

First, we find the VAT exclusive selling price: [ \text{VAT Exclusive Selling Price} = \frac{\text{VAT
Inclusive Price}}{1 + \text{VAT Rate}} ] [ \text{VAT Exclusive Selling Price} = \frac{Br 20,000,000}{1 + 0.15}
] [ \text{VAT Exclusive Selling Price} = Br 17,391,304.35 ]

Now, we calculate the VAT collected on the sale: [ \text{VAT Collected} = \text{VAT Inclusive Price} - \
text{VAT Exclusive Selling Price} ] [ \text{VAT Collected} = Br 20,000,000 - Br 17,391,304.35 ] [ \text{VAT
Collected} = Br 2,608,695.65 ]

Task 1.2: Direct Tax Liabilities The direct tax liability would be the business profit tax which is 30% of the
profit. To calculate the profit, we subtract the cost of goods sold (COGS) and expenses from the sales
revenue.

[ \text{Profit} = \text{Sales Revenue} - \text{COGS} - \text{Expenses} ] [ \text{Profit} = Br 20,000,000 -

(0.75 \times Br 20,000,000) - Br 1,000,000 ] [ \text{Profit} = Br 20,000,000 - Br 15,000,000 - Br
1,000,000 ] [ \text{Profit} = Br 4,000,000 ]

Now, we calculate the business profit tax: [ \text{Business Profit Tax} = \text{Profit} \times \text{Tax
Rate} ] [ \text{Business Profit Tax} = Br 4,000,000 \times 0.30 ] [ \text{Business Profit Tax} = Br
1,200,000 ]

Project Six:

Task 1.1: Net Profit Total Income (including VAT): Br 2,500,000 (Adama) + Br 1,500,000 (AAU) + Br
150,000 (Other) Total Expenses: Br 2,000,000 (COGS) + Br 200,000 (Administrative) Employment Income
Tax Withheld: Br 55,000

[ \text{Net Profit} = \text{Total Income} - \text{Total Expenses} - \text{Employment Income Tax

Withheld} ] [ \text{Net Profit} = (Br 2,500,000 + Br 1,500,000 + Br 150,000) - (Br 2,000,000 + Br 200,000)
- Br 55,000 ] [ \text{Net Profit} = Br 3,150,000 - Br 2,200,000 - Br 55,000 ] [ \text{Net Profit} = Br
895,000 ]
Task 1.2: Direct Tax Liabilities [ \text{Business Profit Tax} = \text{Net Profit} \times \text{Tax Rate} ] [ \
text{Business Profit Tax} = Br 895,000 \times 0.30 ] [ \text{Business Profit Tax} = Br 268,500 ]

Task 1.3: Indirect Tax Liabilities Assuming VAT is included in the income and the rate is 15%, we
calculate the VAT paid on sales: [ \text{VAT Paid} = \text{Total Income} - \frac{\text{Total Income}}{1 + \
text{VAT Rate}} ] [ \text{VAT Paid} = Br 3,150,000 - \frac{Br 3,150,000}{1 + 0.15} ] [ \text{VAT Paid} = Br
3,150,000 - Br 2,739,130.43 ] [ \text{VAT Paid} = Br 410,869.57 ]

Task 1.4: Direct & Indirect Taxes

 Direct Taxes: Taxes levied directly on income, such as business profit tax and employment
income tax.

 Indirect Taxes: Taxes collected by an intermediary (such as a retailer) from the person who
bears the ultimate economic burden of the tax (such as VAT).