UNITY UNIVERSITY

FACULTY of BUSINESS and ECONOMICS

PUBLIC FINANCE and TAXATION
Individual Assignment
General Instruction
i. The submission will be on the date of class end of the semester
ii. Copying the assignment from one another will nullify your result
iii. Neatness and clarity has got positive impact upon your result
iv. Any submission after the deadline won’t be considered
v. Submission will be made through your class representative.

1. Addis Ababa Shoe factory, VAT registered PLC, purchased 10,000 kg of processed leather
from AWASH leather factory at VAT inclusive price of birr 690 per kg. It has also imported
chemicals and other raw materials worth birr 400,000 (C.I.F and other duty excluding VAT) for
shoe making in the month of Hidar. Addis Ababa shoe factory exported international standard
shoes to Canada and India worth birr 3 million and sold 20,000 pairs of shoes at VAT exclusive
price of birr 300 for each pairs of shoes to local market.
Required:
Determine VAT payable (VAT refund) for the given month.
2. ABC Company sold a building, which is held for business for Br. 1,000,000, which is
acquired at a cost of Br. 1,200,000. Depreciation until the time of sale amount Br. 500,000
and property tax paid for the building Br. 50,000.
Required: Calculate the capital gain tax payable by ABC Company.
3. Mr. Binda is a tax accountant of Topiced Company. His basic salary is Br.4, 200 for 160
normal working hours. He worked 186 hours during the month of Meskerem, 2002. All
overtime work is done on employee rest days. The employee is entitled to receive Br.500
monthly transportation allowance as per the employment contract. Mr. Binda contributes
10% of his basic salary to provident fund and the employer contributes 18% of his basic
salary to the same fund.
 Required: - What is Mr. Binda’s income tax payable based on Ethiopian Income Tax
laws?

4. Record the following VAT related transactions.and determine input VAT and output VAT

a. Purchase 8,000 Br different materials for local and export market from ABC
Company for cash subject to VAT

b. Purchase different types of inputs at VAT inclusive price of 10,500 Br on account

c. Sold products to XXX institute at VAT inclusive price of 4,800 Br subject to VAT

d. Exported products to Democratic republic of Congo, 50,000 Br

e. Imported office equipment cost, insurance and freight of 3,000, 500 and 4,000 Br
respectively

5. Consider the following partial data from the accounting records of ABC Company for the
year ended Dec. 31, 2009.

Data related to building:

 Original cost of building-----------------------------------------2,000,000

 Tax accumulated depreciation on building--------------------600,000
 On August 15,2009, the company made an improvement on a building, which is
material and considered as a capital expenditure on building costing, Br 200,000
Data related to Vehicles

 The cost of the pool of vehicles in the opening balance sheet of the tax year, 2009
was Br 5000,000
 The tax accumulated depreciation at the beginning balance sheet of the tax year,
2009 was 2,000,000
 The company has acquired a new vehicles costing Br 1,500,000 during the year
ended 2009
  The company also sold two used cars during the tax year as follows:

Type of Vehicle (car) Original cost Acc. Dep Sales price

Car 1 250,000 100,000 200,000
Car 2 600,000 400,000 150,000

Required:

a. Compute Depreciation base and tax deductible depreciation expenses for the
building and pools of vehicles separately for the year ended December 31, 2009

b. Compute the depreciation base & tax deductible depreciation expense for
Vehicles only for the year ended December 31,2010, assuming there were no
addition or disposal of vehicles in that year.

6. XYZ firm has owned a building whose construction is completed on August 2008 at a total
cost of Br 8,000,000. The building consists 10 residential apartment rooms all of which are
furnished with equipment and furniture at a total cost of Br 500,000. The rental income from
each of the 10 furnished rooms is equal amounts to Br 25,000 per month.

The accountant of the firm has reported the following information related to the building being
leased:

 Repair and maintenance cost-----------------------------10,000

 Insurance cost-------------------------------------------------20,000
 Interest expense bank loan taken for construction----40,000
 Land and building tax-----------------------------------------5000
 Annual lease payment on land used for building--------15,000
 Depreciation of building as per income tax law-----------?
 Depreciation of furniture and equipment as per tax law --?
Required:

a. Assuming the lessor is a body, compute the amount of rental income tax to be paid
 b. Assuming the lessor is an individual and maintains books of accounts, compute the
amount of rental income tax to be paid
c. Assuming the lessor is an individual and does not maintain proper books of accounts,
compute the amount of rental income tax to be paid.

7. Assume W/ro Rahel let out her building to Ato Simon for Br 300,000 per year for three
years and collected Br 900,000 in advance which covers three years rental income starting
from beginning this tax year 2010 E.C. Assume the building let out at the beginning of the
tax year, 2010.
a. Assume W/ro Rahel does keep book of accounts, how much is rental income tax
payable during the tax year 2010?
b. Assume W/ro Rahel does not keep book of accounts, how much is rental income tax
payable during the tax year 2010?
8. Suppose that XYZ S.C declared dividend on Meskerm 20, 2005 on an amount equal to Br. 4
million to be distributed for outstanding shares. The total number of outstanding shares at
dividend record date was 5,000 shares. W/o Tigist owned 100 shares on the same date.
Based on the above information answer the following questions
a. The amount of dividend paid to W/roTigist equals
b. The total tax dividend paid by W/roTigist is
c. How much after tax cash proceeds she will receive from such dividend?
9. AtoBelete bought a house located at Bole road, Addis Ababa for birr 2.5 million. He used
the house for business and sold it for birr 3 million.

Required:

Determine the capital gain tax that AtoBelete would pay totax authority ?

10. Walia Share Company bought a house located at Kaliti, Addis Ababa for birr 5.5 million.
The company used the house for factory and sold it for birr 7.5 million.

Required: Determine the capital gain tax that Walia Share Company would pay to the tax
authority?