Question

Engineers is carrying on professional activity. One partner is working on full-time basis and his salary as per contact is 3000 per month. The company did not receive any bankruptcy certificate of any debtor.

Particulars	Amount	Debtors	Amount
Sales	1,200,000	A	4000
Cost of Goods Sold	200,000	B	5000
Gross Profit	1,000,000	C	1700
Administrative expense	80,000	D	6500
Depreciation	117,500	Total	17200
Partner’s Salary	36,000
Bad debts	17,200
Total of expense	183,250
Net Profit	816,750
Tax	122,513

Particular	Book Value	Depreciation	Depreciation Value
Truck	255000	15%	38250
Furniture	150000	15%	22500
Computers	45000	15%	6750
Land	500000	10%	50000
Total	945000		117500

Based on the above accounting information Calculate tax liability of the company (show all calculation in good form)

Answer 1

After subtracting all expenses from sales

Net profit came = 816,750

And on this tax liability arose of 122,513

But company didn't receive any bankrupty certificate of any debtor that's mean all debts are good.

So let's first calculate tax rate

Net profit × tax rate = tax liability

Tax rate = ( tax liability ÷ Net profit ) × 100

Tax rate = (122513/ 816750 ) × 100

Tax rate in % = 15 %

Now let's correct the net profit amount by adding back bad debt because all debtors are good.

NET PROFIT 833950

TAX LIABILITY WILL BE = NET PROFIT ×15%

Tax liability = 125093 approx.