Income Statement - Case Study Example

'Repairs to flat420Repairs to shop floor575Cash register repairs125Re-painting of exterior of property2,240Replacement weighing scales75Sundry allowable items2,100Total5,5359. Sundry expenses'Tea, coffee and milk for staff78Telephone, postage and stationery284Calendars for customers @ %2.80 each560Window cleaning 500Cleaning expenses600Donation to local Playgroup250Sundry small expenses 130Total2,40210. DepreciationDepreciation is calculated on a straight-line basis over 4 years for motor vehicles and equipment.

Additional information:1. Capital allowancesThe written down values for capital allowance purposes at 6 April 2008 were as follows:'Motor car (Vauxhall Astra) Private use agreed as 25%10,500General Pool7,2002. Additions and disposals - fixed assets'Addition21 May 2008Computer equipment3,200Disposal1 July 2008Computer equipment proceeds (original cost '2,100)3003. Goods for own useTed estimates that fruit and vegetables with a retail price of '10 (cost price '3.50), are taken for the family's use each week.

No provision has been made in the accounts.Task 1Prepare a trading profit computation for Ted's business for the year ended 5 April 2009.Task 2Net property rental income from the flat has been agreed with HMRC as '4,800 for 2008/2009.Lora received dividends of '2700 for the year 2008/2009Prepare income tax computations for Ted and Lora, showing Income Tax liabilities and Income Tax payable.Task 3Ted and Lora are not expecting to pay income tax this year as the Income Statement shows a loss. Write a letter to Ted explaining why you have disallowed each of the Income Statement items in the trading profit computation for income tax purposes, the amount of Income.

Write a letter to Ted explaining why you have disallowed each of the Income Statement items in the trading profit computation for income tax purposes, the amount of Income tax payable and the dates due, making any reasonable assumptions you wish. Assuming that Ted goes ahead with his plans to expand the business to include a juice and smoothie bar, prepare a trading profit computation for the new business, for a full year of trading based on the projected results for the year to 5 April 2009 given above, (use 2008/9 tax rates and allowances).