Business Tax FA2016 Assessment question

LouboutinLou1LouboutinLou1 Just JoinedRegistered Posts: 21
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

Comments

  • LouboutinLou1LouboutinLou1 Just Joined Registered Posts: 21
    Business Tax FA2016 Assessment question
  • RemeReme Registered Posts: 19
    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
  • LouboutinLou1LouboutinLou1 Just Joined Registered Posts: 21
    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??
  • RemeReme Registered Posts: 19

    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.
  • LouboutinLou1LouboutinLou1 Just Joined Registered Posts: 21
    Many thanks Reme :)
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