Question 1ai
| Note | £ | £ | |
|---|---|---|---|
| Gross profit | 73,440 | ||
| Expenses | |||
| Motor expenses | 1 | 7,660 | |
| Property expenses | 2 | 16,200 | |
| Repairs and renewals | 3 | 6,420 | |
| Other expenses | 4 | 10,960 | |
| (41,240) | |||
| Net profit | 32,200 |
Note 1 – Motor expenses
Motor expenses are as follows:
| £ | |
|---|---|
| Cost of running Richard’s motor car | 4,710 |
| Cost of running a motor car used by the restaurant’s chef | 2,670 |
| Parking fines incurred by Richard | 280 |
7,660 |
Richard’s motor car is used 70% for private journeys, and the chef’s motor car is used 20% for private journeys.
Note 2 – Property expenses
Richard lives in an apartment which is situated above the restaurant, and one-fifth of the total property expenses of £16,200 relate to this apartment.
Note 3 – Repairs and renewals
Repairs and renewals are as follows:
| £ | |
|---|---|
| Decorating the restaurant | 5,100 |
| Decorating the apartment | 1,320 |
6,420 |
The property was in a usable state when it was purchased.
Note 4 – Other expenses
The figure of £10,960 for other expenses includes legal fees of £2,590 in connection with the purchase of the restaurant property. The remaining expenses are all allowable.
Note - The capital allowances figure that can be deducted from operating profits is £3,780
Required:
Calculate Richard Feast’s tax adjusted trading profit for the year ended 5 April 2013.
Notes:
1. Your computation should commence with the net profit figure of £32,200, and should list all of the items referred to in notes (1) to (4), indicating by the use of zero (0) any items which do not require adjustment.
2. In answering this part of the question you are not expected to take account of any of the information provided in parts (b), (c) or (d) below. (7 marks)