Role of Taxation - Introduction to Taxation - Exam, Exams for Taxation Management. Amity Business School

Taxation Management

Description: Role of Taxation, Different Economic Climates, Growth and Recessionary Climates, Direct Taxation, Indirect Taxation, Taxable Income, Depreciation Charge, Taxable Income. This exam paper is going to be searched most because new students need it. This past exam is for Introduction to Taxation course.
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Autumn Examinations 2008/ 2009
Exam Code(s) 3BC1,4BC2,4BC3,4BC4,4BC5,1EM1,1OA1
Exam(s) 3rd BComm,4th BComm International, Erasmus, Visiting
Module Code(s) AY308
Module(s) Taxation I
Paper No. 1 of 1
Repeat Paper Yes
External Examiner(s) Professor B. O’Dwyer
Internal Examiner(s) Professor S. Collins, Dr. E. Mulligan
Instructions:
Answer Question 1 in Section A
and TWO questions from Section B
Duration 2 ½ Hours
No. of Pages 7
Department(s) Accountancy and Finance
Course Co-ordinator(s) Emer Mulligan
Requirements:
MCQ
Handout
Statistical/ Log Tables
Cambridge Tables
Graph Paper
Log Graph Paper
Other Materials Table of rates of taxation included
SECTION A
COMPULSORY
Question 1
Part (a)
(i) Discuss the role of taxation in the economy. You should make specific reference
to this role in different economic climates i.e. growth and recessionary climates.
(ii) Briefly compare and contrast direct and indirect forms of taxation.
(15 Marks)
Part (b)
John Ahearne is a single Irish citizen who is an employee of IrishCo Ltd. John was
made redundant on November 1, 2008.
On being made redundant, John received the following from the company:
Statutory redundancy 7,000
Payment in lieu of notice 20,000
Company computer & printer 1,500
Compensation payment 35,000
Previously earned holiday pay 3,000
Additional information relating to John:
Company lump-sum payment received under a
revenue-approved pension scheme 8,000
Annual 12-month taxable BIK 2,000
John’s average annual taxable cash salary over last
36 months (he has worked for IrishCo Ltd
21 years and 8 months) 42,000
Required:
Calculate John’s 2008 taxable income based on the above information, showing all
calculations clearly. (15 Marks)
Total: 30 Marks
SECTION B OVER THE PAGE
2
SECTION B
YOU ARE REQUIRED TO ATTEMPT ANY
TWO QUESTIONS FROM THIS SECTION
Question 2
(a) Michael Reynolds is single and has been self-employed for many years. He
makes up annual accounts to 31 December. His profit and loss account for the year
ended 31 December 2008 is as follows:
Fees charged 205,000
Other income and gains (Note 1) 26,200
231,200
Salaries (Note 2) 65,000
Repairs and renewals (Note 3) 7,000
Advertising 2,500
Depreciation (Note 4) 6,200
Travel and entertainment (Note 5) 6,500
Telephone (Note 6) 2,200
Subscriptions (Note 7) 850
Bad debts (Note 8) 7,220
Legal and Professional Fees (Note 9) 31,500
Financial costs (Note 10) 6,950
Postage and Stationary 4,200
Miscellaneous (Note 11) 6,200
146,320
Net Profit 84,880
Note 1: This is made up as follows:
Rental income from house in South of France 8,000
Rental income from house in Ireland 12,000
Irish Deposit interest (net) 3,500
Dividends from Irish company (net) 1,500
Gain on sale of shares in French company 1,200
26,200
Note 2: Salary to self 39,850
Salary to brother-in-law 24,370
VHI for self 780
65,000
Note 3: This includes €1,000 which is the cost of a computer in use in the business at
year end.
Note 4: The depreciation charge relates to Michael’s BMW and fixtures and
fittings. The fixtures and fittings were purchased in May 2006 at a cost of
€38,000. Michael bought his BMW in January 2006 for €48,000 (original
market value) and has agreed 50% business usage with the Inspector of Taxes.
Question 2 continued over the page………..
3
………..Question 2 continued from previous page
Note 5:
Staff entertainment 1,200
Supplier entertainment 1,400
Motor running expenses-BMW 3,900
6,500
Note 6: This figure does not include Michael’s home telephone charges, which
amounted to €1,200 in 2008. He estimates that approximately 40% of the home
telephone charges are for his business.
Note 7: This was made up of a €300 subscription to an ‘eligible charity’ and €550 to a
trade association.
Note 8: Bad debts
Opening provision:
-general (7,000)
-specific (3,200)
-bad debts written off 3,260
Closing provision:
-general 10,000
-specific 4,160
Profit and loss account 7,220
Note 9: Legal: Pursuit of bad debts 4,220
Renewal of lease on business premises 900
Renewal of patent licence 2,500
Dispute with brother regarding inheritance 10,500
Tax and professional advice connected with sale of shares 6,000
Annual Accountancy fees 7,380
31,500
Note 10: Interest on bank overdraft 2,300
Interest on working capital term loan 3,800
Miscellaneous bank charges 850
6,950
Note 11: This includes insurance on the business premises amounting to €1,500 and a
covenant of €1,200 (gross) paid to Michael’s daughter, aged 20 who is attending
NUIG.
Required:
Compute Michael’s taxable income for 2008. (20 Marks)
Question 2 continued over the page…..
4
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