This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
You're on a roll — let's solve this problem. 18. Mr. Kobe is a civil servant who earns a monthly salary of Ksh. 21,200. He has a house allowance of Ksh. 12,000 per month, other taxable allowances are commuter Ksh. 1,100, medical allowance Ksh. 2,000. He is entitled to a personal relief of Ksh. 1,240 per month. Using the income rates below, solve the questions that follow. | Income in Ksh. per month | Rates in % | | :----------------------- | :--------- | | 1 - 8,400 | 10 | | 8,401 - 18,000 | 15 | | 18,001 - 30,000 | 20 | | 30,001 - 36,000 | 25 | | 36,001 - 48,000 | 30 | | Above 48,000 | 35 | a) i) His monthly taxable income. Step 1: Identify all taxable income components. Monthly salary = Ksh. 21,200 House allowance = Ksh. 12,000 Commuter allowance = Ksh. 1,100 Medical allowance = Ksh. 2,000 (Assuming this is taxable as per the student's initial calculation which was marked correct). Step 2: Calculate the total monthly taxable income. Taxable Income = Salary + House Allowance + Commuter Allowance + Medical Allowance Taxable Income = 21200 + 12000 + 1100 + 2000 Taxable Income = 36300 Ksh His monthly taxable income is Ksh 36,300. ii) Net tax (PAYE) Step 1: Calculate the tax for each income band based on the taxable income of Ksh. 36,300. • First band (1 - 8,400): 8400 × 10\% = 8400 × (10)/(100) = 840 Ksh • Second band (8,401 - 18,000): (18000 - 8400) × 15\% = 9600 × (15)/(100) = 1440 Ksh • Third band (18,001 - 30,000): (30000 - 18000) × 20\% = 12000 × (20)/(100) = 2400 Ksh • Fourth band (30,001 - 36,000): (36000 - 30000) × 25\% = 6000 × (25)/(100) = 1500 Ksh • Fifth band (36,001 - 48,000): The remaining income is 36300 - 36000 = 300 Ksh. 300 × 30\% = 300 × (30)/(100) = 90 Ksh Step 2: Calculate the total gross tax. Gross Tax = 840 + 1440 + 2400 + 1500 + 90 Gross Tax = 6270 Ksh Step 3: Calculate the Net Tax (PAYE) by subtracting the personal relief. Personal relief = Ksh. 1,240. Net Tax (PAYE) = Gross Tax - Personal Relief Net Tax (PAYE) = 6270 - 1240 Net Tax (PAYE) = 5030 Ksh The Net Tax (PAYE) is Ksh 5,030. b) In addition to the PAYE, the following deductions were made. Ksh. 250 for NHIF, Ksh. 120 service charges, he repays a loan at sh. 4,500 and contributes towards savings at sh. 1,800 every month. Calculate his net salary per month. Step 1: Calculate the total deductions. Total deductions = PAYE + NHIF + Service charges + Loan repayment + Savings contribution Total Deductions = 5030 + 250 + 120 + 4500 + 1800 Total Deductions = 11700 Ksh Step 2: Calculate the net salary. Net salary = Taxable Income - Total Deductions Net Salary = 36300 - 11700 Net Salary = 24600 Ksh His net salary per month is Ksh 24,600. Send me the next one 📸