Mr Onyango operates an electronics shop along Kenyatta Avenue in Nairobi. He undertook the following transactions for the month of May 2018.
1 May 2018
4 May 2018
4 May 2018
5 May 2018
6 May 2018
8 May 2018
9 May 2018
12 May 2018 Purchased 50 stop watches for a total of Sh.50,000
15 May 2018 Purchased 100 alarm clocks at a total value of Sh.80,000 18 May 2018 Sold the remaining 5 cameras each at 25% above cost price 20 May 2018 Sold 3 slide projectors for a total of Sh.750,000
Purchased 10 cameras for a total of Sh. 500,000. Purchased flashbulbs for a total of Sh.200,000 Purchased 5 slide projectors for a total of Sh. 1,000,000 Sold 5 cameras each at 25% above cost price. Purchased 200 wristwatches at Sh.1,500 each
Sold 2 slide projectors for a total of Sh. 500,000 Sold flashbulbs that cost Sh. 100,000 for Sh.150,000
22 May 2018 Sold 100 wristwatches at Sh.2,000 per watch 25 May 2018 Sold 70 alarm clocks each at 30% above cost. 27 May 2018 Sold 50 stop watches for a total of Sh. 75,000
Required
(i) calculate (prices are inclusive of VAT)
• Input
• Output Tax
(ii) Prepare the VAT account clearly showing the VAT payable (refundable).
(iii)State when the above tax is due, and the penalties payable if the tax is not paid on the due date.
I need an answer to that
To calculate the output tax, we need to determine the total sales and apply the VAT rate. The VAT rate in Kenya is currently 16%.
Step 1: Calculate the total sales for each transaction
- 18 May 2018: Sale of 5 cameras at 25% above cost price
Cost price per camera = 500,000 / 10 = 50,000
Selling price per camera = 50,000 + (25% * 50,000) = 62,500
Total sales = 5 * 62,500 = 312,500
- 20 May 2018: Sale of 3 slide projectors
Total sales = 750,000
- 22 May 2018: Sale of 100 wristwatches
Total sales = 100 * 2,000 = 200,000
- 25 May 2018: Sale of 70 alarm clocks at 30% above cost
Cost price per alarm clock = 80,000 / 100 = 800
Selling price per alarm clock = 800 + (30% * 800) = 1,040
Total sales = 70 * 1,040 = 72,800
- 27 May 2018: Sale of 50 stop watches
Total sales = 75,000
Step 2: Calculate the output tax
Total sales for May = 312,500 + 750,000 + 200,000 + 72,800 + 75,000 = 1,410,300
Output tax = 1,410,300 * 0.16 = 225,648
The output tax for the month of May is Sh. 225,648.
Now let's move on to preparing the VAT account:
VAT Account
Debit Credit
Output Tax (Sales VAT) - 225,648
Input Tax (VAT on Purchases) - Addition
VAT Payable (Refundable) - 225,648
The VAT payable (refundable) for the month of May is Sh. 225,648.
The due date for paying VAT is the 20th of the following month. If the tax is not paid on the due date, a penalty of 5% of the tax payable is charged for every month or part of a month that the tax remains unpaid.