ST.

PAUL’S UNIVERSITY
Private Bag - 00217 Limuru, Kenya
Tel. Office: 020-2020505/10; Mobile: 0728-669000
Website: www.spu.ac.ke
GO D

SCHOOL OF BUSINESS AND LEADERSHIP STUDIES

BACHELOR OF BUSINESS ADMINSTRATION AND MANAGEMENT
SEPTEMBER - DECEMBER 2023
BAC 302 – PRINCIPLES OF TAXATION

DATE: DECEMBER, 2023 TIME: 9.00am – 9.00pm (12 hours)

INSTRUCTIONS:
1. Answers ALL Questions.
2. Submit your answers in word format unless otherwise instructed. Type your answers in a
word document. Do not PDF your document.
3. Submit your answers via the Exam Portal.
4. For images (photographs, graphs and calculations etc), use legible writing. Take an image
(Photo) of all the answer sheets and submit via the Exam Portal. Remember to number the
answer sheet pages.

NOTE: No submissions will be accepted in any other mode e.g. emails, WhatsApp etc.

5. The examinations start at 9.00am and all the answer scripts MUST be posted on the portal by
9.00pm the following day (within 12 hours).
6. Submit your answer sheets as one document. Click the “SUBMIT” button to ensure that your
answer sheet is uploaded in the portal.
7. Allow yourself enough time to confirm that your submission has gone through. You will
receive an automated email receipt on successful submission.

NOTE: Submission deadlines must be observed.

8. On the front page of each answer script you are required to observe the following instructions:
 Write your student number in full
 Write the unit code and title
 Write the date of examination
 Write the name of the lecturer
 Write “SUPPLEMENTARY” or “DEFFERED EXAM” as the case may be, (if you are
taking a supplementary or deferred examination).

1
QUESTION ONE

Explain the relevance of the “Ability to pay theory” in Kenya as applied in the principle of tax
(3 mks)

QUESTION TWO

1. Flamingo Ltd. commenced business on 1 January 2019. The following fixed assets of the
company which it acquired prior to the commencement of the business were stated at
their written-down values as at 1 January 2019:
Kshs
Milling machine 2,220,000
Forklifts 1,360,000
Tractors 4,400,000
Lorries 1,700,000
Packaging machine 2,250,000
Crushing machine 2,340,000
Conveyor and sorter 3,620,000
Two pick-ups 1,400,000
One lorry 1,700,000
Saloon cars 890,000
Furniture and fittings 772,000
Land 10,500,000
The building in which the processing was to be carried was constructed in 2019 but was first
used for manufacture in 2020. The building cost was kshs 7,300,000 in 2020 and the estimated
value in January 2020 was kshs. 6,200,000. In 2020 the company bought the following assets:
Kshs
Toyota saloon car 1,350,000
Lorry (3.2 tonnes) 2,600,000
Tractor 1,770,000
Furniture 140,000
Land 3,120,000
Pick-up 2,000,000
Computers 25,000
Computer scanner 200,000
Printers 100,000
Milling machine 2,775,000
The following assets were disposed of in 2020:
Kshs
Forklift 240,000
Saloon car (original cost kshs. 250,000) 460,000
Printer 25,000
Land 1,120,000
Packaging machine 2,250,000

2
A tractor was damaged through a road accident during the year and the insurance company paid
kshs 1,600,000 as compensation.

Required: Capital allowances for Flamingo Ltd for 2020 (9 mks)

QUESTION THREE

From the information below concerning an employed Kenyan on a pension scheme, calculate the
gross pay, chargeable pay, tax charged and PAYE for the individual (Clearly explain and show
your workings)

Description AMOUNT
Basic Pay 163,562
ALLOWANCE
Housing Amount 139,675
Commuting Allowance 10,000
Gross Pay ???
TAX CALCULATIONS
Defined Contributions 200
Provident Fund 16,356.2
Taxable Pay ???
Tax Charged ???
Personal Relief 1,408
STATUTORIES
N.S.S.F 200
N.H.I.F 1,700
P.A.Y.E ???
(6 mks)

3
QUESTION FOUR

Halwings Group Ltd, a company operating in Kenya has the following information as at 1st
December 2020;

i. The company made a profit before tax of Ksh. 14,000,080 in the past 12 months of
accounting
ii. The company made a net book loss of Ksh.1,100,050 in the year 2019
iii. The company engaged in consultancy services in the year 2020 where they were paid
Ksh. 5,000,000
iv. The company supplied vaatable goods worth Ksh. 3,500,000 and Ksh. 9,000,000 in
the years 2019 and 2020 respectively
v. The company is seeking to invest Ksh. 7,000,000 in the coming year in a foreign
country and in a different line from what they are dealing with in Kenya
Required:

a. Calculate the different taxes due from the company as at the close of the year 2020
(9 mks)

b. Advise the company concerning their planned investment in terms of the taxation concept
of investment (3 mks)

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