Business Tax FA2016 Assessment question

LouboutinLou1

Hi,

This question is from the AAT practice exam 2016 - Task 3

I managed to work out the salaries for Poppy, Paul & Pino but can't seem to be able to get the profit shares correct.

Can anyone help please?

Thanks

LouboutinLou1

Business Tax FA2016 Assessment question

Reme

Hi,

From 1st April
Salary for Poopy > 5360
Salary for Paul > 3750
Total salaries paid = 9110

Profit year ended 31 March > 68600 / 12 = 5717 profit per month

Profit for the first period > 5717 x 3 = 17150
You then need to deduct the salaries already paid from the profit to share in the first period
17151-9110=8041
Then share the profit left as indicated:
Poopy 8041x40%= 3216
Paul 8041x60%= 4824

Same for the second period.

Total salaries paid > 43890
Profit for the second period > 68600/12x9 = 51445
Profit left for sharing > 51445 - 43890 = 7560
Poopy 7560 x 20% = 1512
Paul 7560 x 40% = 3024
Pino 7560 x 40% = 3024

If you add up all the salaries & profit paid it should give you the total profit for the year

5360 + 3750 + 3216 + 4824 + 43890 + 1512 + 3024 + 3024 = 68600

LouboutinLou1

Many thanks Reme, makes perfect sense

I seem to be struggling with BTax FA2015 also (Task 3)

I have the tax years and basis periods correct but the profit incorrect. Can't find where I'm going wrong with this one??

Reme

LouboutinLou1 said:

Many thanks Reme, makes perfect sense

I seem to be struggling with BTax FA2015 also (Task 3)

I have the tax years and basis periods correct but the profit incorrect. Can't find where I'm going wrong with this one??

@LouboutinLou1
You need to apportion each profit given accordingly to each period.

P/e 30 June 2014 > 50750
P/e 30 June 2015 > 106800
P/e 30 June 2016 > 77400

First year > 50750/7X4 = 29000
7 > these are the months which the first profit belongs to (1 Dec - 30 June)
4 > since the first year is only until March 2014, only 4 months will be considered.

Second year > 50750 + (106800/12X5) = 95250

Third year > 106800

In the second year is where the profit is being overlapped > 29000 from 1 Dec to 6 April which were already taken into consideration in the 1st year.

LouboutinLou1

Many thanks Reme