Question 1 (20 marks)

The following information below to Nust Ltd for the year end 31 December 2019.

Accounting profit for the period was $590 000

Some of the items charged against profit are as follows:

Donations $10 000

Profit on disposal $5 000

Dividends received $25 000

Fines: $8 000
Depreciation charge $50 000

Provision for warranty $12 000

Rent $40 000

Additional information

1. Nust bought land for $120 000 and built a manufacturing building for $1 500 000. The
building was available for use on 1 January 2019 and has 30-year useful life. The land and
building was subsequently revalued on 31 December 2019 by $30 000 and $150 000
respectively. Zimra allows 5% tax allowance on manufacturing buildings and non on land.
2. Trade receivable balance on 31 December 2019 is $40 000
3. An entity paid $10 000 in advance for Electricity, Water accrual is $5 000 and Provision
for warranty is $12 000.
4. The entity also received revenue in advance of $9 000 and a 12% long-term loan of
$600 000 at the beginning of the year.
5. Current tax on 1 January 2019 is $5 000 payable.
6. Tax rate for income tax is 25% and 20% CGT

Required:

Determine current tax for the year and the income tax expense to be charged.