This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
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Step 1: Calculate Emerick's monthly taxable income. Taxable income includes the basic salary and all taxable allowances. The transport allowance is stated as non-taxable. Taxable Income = Basic Salary + House Allowance + Medical Allowance Taxable Income = Kshs 38,780 + Kshs 10,900 + Kshs 3,850 Taxable Income = Kshs 53,530 The monthly taxable income is Kshs 53,530. Step 2: Calculate Emerick's monthly Pay As You Earn (PAYE). We use the provided tax table, interpreting "Tax rate (Kshs per Kshs)" as a percentage. First band: Kshs 1 - 12,000 at 2\% Tax_1 = 12,000 × 0.02 = Kshs 240 Second band: Kshs 12,001 - 22,500 (range of 10,500) at 3\% Tax_2 = (22,500 - 12,000) × 0.03 = 10,500 × 0.03 = Kshs 315 Third band: Kshs 22,501 - 33,000 (range of 10,500) at 4\% Tax_3 = (33,000 - 22,500) × 0.04 = 10,500 × 0.04 = Kshs 420 Fourth band: Kshs 33,001 - 43,500 (range of 10,500) at 5\% Tax_4 = (43,500 - 33,000) × 0.05 = 10,500 × 0.05 = Kshs 525 Fifth band: Remaining income above Kshs 43,500 at 6\% The taxable income is Kshs 53,530. Taxable income in this band = 53,530 - 43,500 = Kshs 10,030 Tax_5 = 10,030 × 0.06 = Kshs 601.80 Total gross tax (PAYE before relief): Gross PAYE = Tax_1 + Tax_2 + Tax_3 + Tax_4 + Tax_5 Gross PAYE = 240 + 315 + 420 + 525 + 601.80 = Kshs 2,101.80 Subtract the personal tax relief of Kshs 1,054: Net PAYE = Gross PAYE - Personal Tax Relief Net PAYE = 2,101.80 - 1,054 = Kshs 1,047.80 Emerick's monthly Pay As You Earn (PAYE) is Kshs 1,047.80. Step 3: Calculate Emerick's net monthly salary. First, calculate the total gross monthly earnings (basic salary + all allowances, including non-taxable). Gross Earnings = Basic Salary + House Allowance + Medical Allowance + Transport Allowance Gross Earnings = 38,780 + 10,900 + 3,850 + 5,200 = Kshs 58,730 Next, calculate the total deductions. Total Deductions = NHIF + Bank Loan + WCPS + Net PAYE Total Deductions = 3,000 + 7,568 + 780 + 1,047.80 = Kshs 12,395.80 Finally, calculate the net monthly salary. Net Monthly Salary = Gross Earnings - Total Deductions Net Monthly Salary = 58,730 - 12,395.80 = Kshs 46,334.20 Emerick's net monthly salary is Kshs 46,334.20. That's 2 down. 3 left today — send the next one.