Admas University

Faculty of business
Department of accounting and finance
Public finance and taxation individual assignment
1. Identify the following in to “Allowed”, “Disallowed” or “Partially Allowed” business
expenses. For business tax purpose
a) 20% provident fund contribution by the company name
b) 10% provident fund contribution by the employee
c) 15% provident fund contribution by the company name
d) Basic salary of the General Manager of NMS p.l.c is br4,500 and his
representation allowance is birr 900.
e) General provision on doubtful debtors
f) Company motor vehicle with net book value of Birr 250,000.00 was completely
destroyed with car accident. The motor vehicle was insured and Birr 200,000.00
was recovered from the insurance company
g) Br 100,000 donation to indigenous NGO to be utilized for anti-HIV campaign.
h) Br 25,000. spending on public relations relating to the promotion of company’s
business activity
i) Br 25,000 spending as entertainment
2. Consider the following income statement of LXM food complex for the year ended sene30, 2014
Gross profit ……………………………………………………………..br.2, 800,000
Other income:
Award…………………..400,000
Rent income ……………200,000
Interest income ………….90, 000
Less; expenses
Remuneration ………………..….200,000
Insurance premium…………..…….50, 000
Rent expense……………………..100,000
 Depreciation………………….………450,000
Amortization…………………………150,000
Penalties ………………………………..11,000
Interest expense …….……………….…32,000
Entertainment …………………………..15,000
Bad debt ………………………………...40,000
Additional information
1. The award is for excellent performance by the business during the current year.
2. The rent income resulted from rent of machine used by business
3. The interest income is fully derived from the investment on government bond
4. Commodities with the total cost of birr 100,000 have been withdraw by the owner. The
company operates at 25% profit mark up. This information was not taken in to account by the
business.
5. The remuneration expenses compromise the following:
a. 20% pension contribution from total employees’ salary of br.150,000
b. 25% representation allowance from the total employees’ salary br.120,0000
6. 80% Insurance premium is attributed to a marine insurance of the business commodities. The
remaining insurance is attributed to life insurance for the partners.
7. Depreciation expense includes:
a. Br. 180,000 from the total value of building br.1,200,000
b. Br.68,000 From the total book value of computer and accessories br.340,000
8. The company’s amortization policy for intangible assets is 20% per annum.
9. Donation compromises made to religious organization and a political party equally.
10. Penalties emanates from tax authorities
11. All interest expenses were from the borrowing of commercial banks at a rate of 12% the NBE
rate is 8%per annum.
12. Entertainment expense was incurred for employees.
 13. At the beginning of the current tax year allowance for uncollectible account had a credit
balance of br.30, 000. Br. 25,000 has been written off to bankrupted customer during the year.
For such receivable legal action had been attempted but not failed.
14. The company’s previous income statement shows (assume no loss was incurred prior to 2004 )

2011 2012 2013

Profit/ loss (150,000) 100,000 (80,000)

15. At the end of the current year the withholding tax receivable account has a balance of br.45, 000.
Required:-
a. Prepare the tax income statement for the tax year
b. Compute the tax liability for the year
c. Compute the tax payable for the year.