Book 2

9
BUSINESS MATHEMATICS 2

Topics dealt with under business mathematics 2 include the following:

Currency
Compound interest formula
Depreciation
Hire purchase
Taxation

A. CURRENCY
Introduction:
The medium for business transaction is called currency. Thus, currency
of a country means the particular type of money in use in that country.
Different countries have different types of currencies. The table below
shows some selected countries and the type of currency inuse in
them.
Country Currency
Uganda Shilling (Ush)
Kenya Shilling(Ksh)
Tanzania Shilling(Tsh)
Ethiopia Ethiopian Birr
South Africa South African Rand
Nigeria Naira (N)
Britain Sterling Pound (UK£)
Europe Euro (€)
Japan Japanese Yen (¥)
India Indian Rupee
Canada Canadian Dollar (C$)
USA US Dollar (US$)
Sweden Swedish Kronor (Кr)
France French Francs (FF)

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Currency conversion:
It is often necessary to exchange the currency of one country for those
of other countries. Such exchange is what is known as currency
conversion.
Currency conversion is usually done through the following institutions:
Central bank of a country
Commercial Banks
Foreign Exchange (Forex) Bureaus
Some big hotels
Conversion between various currencies is usually done using currency
conversion tables. The figures given in the tables are called exchange
rates and they give the equivalent of one currency to units of other
currencies.
For instance, the table below shows the exchange rates that were
produced by the Central Bank of Uganda and published in the daily
monitor in July 2002.
Central Bank of Uganda
Exchange Rates

Currency Buying Selling Mean

1US Dollar 2090 3108 2099
1Sterling Pound 3410 3470 3440
1Euro 2800 3180 2990
1Ksh 26.6 29 27.8
1Tsh 1.2 1.7 1.45
1South African Rand 200 280 240
1Canadian Dollar 1300 1700 1500
1Rwandan Franc 2.5 3.5 3.0
1Sudanese Pound 500 700 600

Example
Use the mean exchange rates in the table above to convert each of
the following currencies to the stated equivalent.
a) 150 US Dollars (US$) to Ush
b) 85 Euros to Ush
c) 3050 Ush to Ksh
d) Ush 2000 to US$
e) Ush 6500 to sterling pound (UK£)

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Solution
a) 150US$ Ush
1US $ 2099Ush
150$ 2099 150 314850Ush
b) 85Euros Ush
1Euro 2990Ush
85 Euros 2990 85 254150Ush
c) 3050Ush Ksh
1Ksh 27.8Ush
1
1Ush Ksh
27.8
1
3050Ush 3050 109.71Ksh
27.8
d) Ush2000 US $
1$ 2099Ush
1
1Ush $
2099
1
2000Ush 2000 0.953$
2099
e) Ush6500 UK £
1£ = 3440 Ush
1
1Ush pound
3440
1
6500 6500 1.89 pounds
3440
Example
Using the exchange rates given in the table above, determine how
many Euros are worth 1UK£.
Solution
First : Euro Ush
1Euro 2990Ush
1
1Ush Euro
2990

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Next : Pound Ush

1 pound 3440Ush
1
1Ush pound
3440
1 1
pound Euro
3440 2990
1
1 pound 3440 1.15 Euros
2990

Example
If the exchange rate for French Franc to Sterling pound is 1£ = 9.00FF
(French Francs) and 1£ = $1.53 (American Dollars).
Find how many American dollars one can get in exchange for 1,000
Francs.
Solution
1£ = 9.00Francs and 1£ = 1.53$
£? = 1,000Francs
1£ 1
1Franc 1,000 Francs 1,000 £
9 9
But 1£ = 9.0Francs = 1.53$
1.53
1Franc $
9
1.53
1000 Francs 1000$ 170$
9.0
Example
If the exchange rate of a Kenya shilling to Uganda shilling is
1Ksh 24Ush and an American dollar to Uganda shilling is
1$ Ush1,950, how many American dollars one would get in
exchange for Ksh 9,750?

Solution
1 Ksh 24 Ush
$1 1950 Ush
9750 Ksh ? $

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1 1
1Ush Ksh $
24 1950
24
1 Ksh $
1950
24
9750 Ksh 9750 120$
1950
Example
A television set costs British pound sterling 220£. Given the exchange
rates as; 1US$ = 0.75£ and 1US$ = Ush 1,800.
Determine the cost of the T.V set in Uganda shillings.
Solution
Cost of T.V set = £220
1$ = 0.75£ and 1$ = Ush 1800
1 £ = 1800 Ush
0.75
220£ = 1800 22 528,000Ush
0.75
Example
A musical tape costs pounds Sterling (£) 8.95. Given that $1.56 = £1.00

and Ush 1045 = 1$.

Find the equivalent cost of the musical tape in:
i) US dollars
ii) Uganda shillings
Solution
Cost of musical tape = £8.95
1.56$ = £1.00 and Ush 1045 = 1.0$
i) In US dollars:
£1 = $1.56
8.95 £ = 1.56 8.95 13.962$
ii) In Uganda shillings:
1$ 1045Ush
13.962$ 1045 13.962 14590.29Ush

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Example
Covert 250 US dollars ($) to pound sterling (£) if;

1 US$ = Ush 980 and 1£ = Ush 1750.

Solution
$250 £=?

1$ = 980Ush and 1£ = 1750Ush

250$ 250 980Ush 24500Ush
But 1£ = 1750Ush
1 £
1Ush
1750
24500
24500Ush 140 £
1750
250$ 140 £

B. COMPOUND INTEREST FORMULA

In S.2, you learnt how to calculate compound interest using step–by–
step method were the amount at the end of the year is taken to be
the principle for the next year.
Some times when calculating compound interest, the time interval
through which the principle is compounded is many and thus the
step–by–step method proves to be tedious. An easier way in this case
is to use the compound interest formula, which is given below.

Compound interest formula:

Amount A of investment of a principal P at a compound interest at a
rate r % per annum (p.a) after n years can be computed using the
formula:
n
r
A P 1
100

Example
Find the compound interest in 10 years on Shs.1, 050,000 at a rate of
8% p.a.
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Solution
n
r
A P 1 , p 1,050,000Ush, r 8%, n 10 yrs
100
10
8
A 1050000 1
100
10
1050000 1.08
2266,871shs
Interest Amount Pr incipal
2266871 1050000
1,216,871shs
Example
A man invested 900,000shs at 18% compound interest. Find the
amount of investment after 2 years.
Solution
n
r
A P 1 , p 900,000Ush, r 18%, n 2 yrs
100
2
18
A 900000 1
100
10
900000 1.18
1,253,160shs
Example
A certain amount of money was invested at a compound interest rate
10% for 5 years. Given that at the end of the period, the owner
received Shs. 500,000. Find the amount originally deposited.
Solution
n
r
Amount , A P1 ,p ?, r 100%, n 5 yrs, A 500,000shs
100
5
r
500,000 P1
100
5
500,000 P 1.1
500,000 1.61051 p
500,000
P 310,461shs
1.61051

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Example
Juma deposited 10 million on his savings account at the bank at a
compound interest rate of 5% per annum. Determine the number of
years the money will take to exceed 15 million.
Solution
n
r
A P 1 ,p 10million, r 5%, n ?
100
n
r
P 1 A
100
n
5
10 1 15
100
n
10 1.05 15
n 15
1.05
10
Taking log10 on both sides,
n log 1.05 log 1.5
log 1.5
n
log 1.05
n 8.3104 yrs
sin ce : n 8.3104 years
n 9 years

C. DEPRECIATION
Definition
This is the lost in value of an item (asset) due to poor maintenance, or
due to tear and wear.
Example
A car valued at Shs 5,000,000 is supposed to depreciate each year at
10% of its value at the beginning of the year. Find its value after three
years.
Solution
Marked price = Shs 5, 000,000
st
1 year:
10
Value 5,000,000 5,000,000 4,500,000 /
100
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nd
2 year:
10
Value 4,500,000 4,500,000 4,050,000 /
100
rd
3 year:
10
Value 4,050,000 4,050,000 3,645,000 /
100
The value of the car after three years is Shs 3,645,000.

D. HIRE PURCHASE
Definition:
This is a system in which a customer purchases (buys) an item but pays
a certain amount first known as deposit and the remaining amount is
then paid in parts known as installments over an agreed period of
time.
The Hire Purchase price (H.P) is given by:
H.P = Deposit + Total Installments

Advantages of Hire purchase

Allows low income earners to enjoy expensive goods.
The customers enjoy the goods while paying for them.

Disadvantages of Hire purchase

Hire purchase price is higher than the cash price.
The customer is issued with a final receipt after making payment for
the last installment.
If the customer fails to pay or fails to complete the last installment,
the goods are confiscated and the customer may be required to pay a
fine.

Example
The cash price of an electric cooker is Shs. 400,000. If one buys the
electric cooker on hire purchase, he has to pay a deposit of Shs.
100,000 and then pay installments of Shs. 15,000 per month for 24
months. Determine:
a) The hire purchase value of the cooker
b) How much more one would pays under hire purchase terms than cash
terms?
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Solution
a) Hire purchase price = Deposit + Total amount payable in installments
100000 15000 24
100000 360000
460,000 shs
b) H.P price exceeds cash price of the cooker by an amount equal to:
460,000 400,000
60,000 shs
Example
The deposit for an office chair in hire purchase term is indicated as
Shs. 150,000. The balance for the office chair is payable in 15 equal
monthly installments of shs. 30,000.
A customer who defaults on an installment is charged a penalty of
10% of the defaulted installment payable next month together with
the installments due.
Mr. Mwanje bought an office chair on hire purchase and paid the
deposit.
rd th
a) If Mr. Mwanje defaulted on the 3 and the 10 months, calculate the
penalty charges he had to pay.
b) If Mr. Mwanje had paid cash for the chair and was given 15% cash
discount, how much money would he have saved?
Solution
a) Amount paid in penalty for one month 10 30,000 3,000shs
100
Amount paid in penalty for two months 2 3000 6,000shs
b) If there was no defaulting, the total amount that Mr. Mwanje was to
pay for the office chair 150,000 30,000 15 600,000shs

Now 15% discount of the cash price 85

600,000 510,000 shs
100
Total amount paid by Mr. Mwanje through hire purchase
600,000 6,000 606,000shs
Therefore the amount of money that could have been saved
606,000 510,000 96,000shs
Example
The following is an advertisement for executive office furniture set:

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EXECUTIVE OFFICE FURNITURE

CASH TERMS: Shs. 1,500,000
HIRE PURCHASE TERMS:
Either: i) Deposit 10% of the value and pay Shs. 130,000 monthly for
12 months.
Or: ii) Deposit 10% of the value and pay Shs. 40,000 for 40 weeks.

a) Calculate the total amount of money one would pay for the furniture:
i) On a monthly hire purchase.
ii) On a weekly hire purchase.
b) If the cost of the office furniture is 20% below the cash price, calculate
the profit made on:
i) A monthly hire purchase and the percentage profit.
ii) A weekly hire purchase and the percentage profit.
Solution
a) i) Total amount payable on monthly hire purchase:
10 1,500,000
130,000 12
100
150,000 1,560,000
1,710,000 shs

ii) Total amount payable on weekly hire purchase:

10 1,500,000
40,000 40
100
150,000 1,600,000
1,750,000 shs

b) Cost price (C.P) 80 1,500,000

1,200,000 shs
100
Selling price through weekly hire purchase 1,750,000shs
Selling price through monthly hire purchase 1,710,000 shs
i) Profit on weekly H.P 1,750,000 1,200,000 550,000shs
550,000 100
% profit 45.8%
1,200,000
ii) Profit on monthly hire purchase 1,710,000 1,200,000 510,000shs
510,000 100
% profit 42.5%
1,200,000

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E. TAXATION
Introduction:
Taxation is the means by which the central government of any country
raises fund for running its services such as:
Defence
Health
Education
Taxes are levied annually on all individuals and companies who earn
income either by employment or through business. This tax collected
is known as revenue.
In Uganda, the institution known as Uganda Revenue Authority (URA)
is mandated to collect taxes and review the tax rule if necessary.
There are two major categories of tax, namely; direct tax and indirect
tax. Two examples of direct tax include:
i) Income tax
ii) Pay–as–you earn (PAYE)

Income Tax:
This is the tax levied on income generated by an individual,
companies, partnership, and sole proprietors.

Common terms:
a. Gross income
This is the total amount of money which an individual or company
earns.
b. Taxable income
Before tax is calculated, some deduction in the form of personal
allowance is made from the gross income. Tax is then calculated from
the remaining amount. This remaining amount is known as taxable
income.
c. Net income
This is the amount of money left after tax has been deducted.
d. Tax free income
This is any amount of money earned by an individual and is not taxed.
This may include the following:
Personal allowance
Medical allowance
Children allowance
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Electricity allowance, etc.

Taxable income is therefore calculated from:
Taxable income = Gross income –Tax-free income.

Tax rates:
Individual taxpayers are assessed using graduated scale rates. For
instance, the table below shows the tax income rates applicable in
Uganda in a certain year.
Taxable income (Ush), p.a Tax rate
Shs. 1,560,000 and below No tax
Shs. 1,560,000 to Shs. 2,820,000 10% of the amount by which
(next 1,260,000) the taxable income exceeds shs.
1,560,000.
Shs.2,820,000 to 4,920,000 15% of the amount by which
(next 2,100,000) the taxable income exceeds shs.
2,820,000.
Shs. 4,920,001 and above 25% of the amount by which
the taxable income exceeds shs.
4,920,000.

Example
In a certain country, the income tax is levied as follows:
A person’s monthly gross income has certain allowances deducted
from it before it is subjected to taxation. This includes family relief and
insurance value.
The allowances are as follows:
Married man Shs. 1,800
Unmarried man Shs. 1,200
Each child below 11years Shs. 500
Each child above 11 but below 18 years Shs. 700
Insurance premium Shs. 1,200
Peter earns shs. 64000. He is married with 3 children of ages between
11 and 18 years and 2 children below eleven years. Given that, he is
insured and has claimed transport allowance of shs. 1,700.
Calculate:
a) His taxable income.
b) The income tax he pays under the income tax rates below:

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Taxable income Rate (%)

0 – 10,000 10
10,001 – 20,000 25
20,001 – 30,000 30
30,001 – 40,000 45
40,000 and above 50

Solution
a) Taxable income = Gross income – Tax free income
Total allowances
(700 3) 1800 1700 (500 2) 1200 7,800shs
Gross income 64,000shs
Taxable, Income 64,000 7,800 56,200shs
b)
Taxable income in the first row = shs 10,000
Therefore income tax 10
10000 1,000shs
100
Taxable income in the second row 20000 10000 10,000shs
Therefore income tax 25
10000 2,5000shs
100
Taxable income in the third row 30000 20000 10,000shs
Income tax 30
10000 3,000shs
100
th
Taxable income in the 4 row 40000 30000 10,000shs
Income tax 45
10000 4,500shs
100
th
Taxable income in the 5 row 56200 40000 16,2000shs
Income tax 50
16200 8,100shs
100
Total income tax that he pays
1000 2500 3000 4500 8100 19,100shs

Example
The table below shows the tax income on taxable income of citizens in
the working class of a certain country.

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Income (Shs) per annum Tax rate (%)

st
1 Shs. 80,000 7.5
Next Shs. 80,000 (80,001 – 160,000) 12.5
Next Shs. 80,000 (160,001 – 240,000) 20.0
240,001 – 320,000 30.0
320,001 – 400,000 36.5
400,001 – 480,000 45.0
A man’s gross annual income is Shs. 964,000. The following are the
allowances including insurance accrued to him.
i) Housing Shs. 14,000 per month.
ii) Marriage, one tenth of his gross annual income
iii) Medical Shs. 50, 700 per annum
iv) Transport Shs. 10,000 per month
v) He has to pay an insurance premium of shs. 68,900 per annum
vi) Family allowances for only four children at the following rates: Shs
3,400 for each child above the age of 18, Shs 4,200 for each child
above 10 but below 18 years and Shs. 5,400 for each child below 9
years. Given that he has a family of five children with three of them
below the age of 8, one 16 years and the elder child 20 years.
Determine:
a) His taxable income
b) The income tax he pays annually as a percentage of his gross annual
income.
Solution
a) Taxable income = Gross income – Tax-free income.
Allowances:
Housing 14500 12 174,000 / p.a
Marriage allowance 1
964000 964,000shs
10
Medical 50,700shs
Transport 10000 12 120,000 / p.a
Insurance 68,900shs
Family allowances will be due to the three children below the age of 8
and one of 16 years 5400 3 4200 20,400shs
Total tax-free income
174000 96400 50700 120000 68900 20400 530,400shs
Taxable income 964,000 530,400 433,600shs
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b)
Income (Shs) per Tax Income tax
annum rate (%)
st
1 Shs. 80,000 7.5 7.5
80,000 6,000shs
100
80,001 – 16 0,000 12.5 12.5
160,000 80,000 10,000shs
100
160,001 – 240,000 20.0 20
240,000 160,000 16,000shs
100
240,001 – 320,000 30,0 30
320,000 240,000 24,000shs
100
320,001 – 400,000 36.5 36.5
400,000 320,000 29,200shs
100
400,001 – 433,600 45.0 45
433,600 400,000 15,120shs
100
Total income tax
6,000 10,000 16,000 29,200 15,120 100,320shs
The income tax he pays as a percentage of his gross annual income
100,320
100
964,000
10.4%
Miscellaneous exercise
1. A camera costs pound sterling £9.50 in UK and US dollars $9.80 in
USA. Given that £1.26 = $2. In which country would one prefer to buy
the camera and how much pound sterling would one save?

2. When the exchange rate was Ush 1,860 to 1 US$, a tourist who was
living in Uganda changed Ush 24,950 at the airport bank. If a
commission of Ush 260 was charged, how many dollars did he get?

3. A trader imported an item worth 10,000 Yen from Japan. If this item
was subjected to 25% import tax in Uganda, how much was it worth in
Uganda shillings if the exchange rate was Ush 1,449.36 to 100
Japanese yen at that time.
4. Hudson wants to go for holidays in USA and he needs dollars. The
selling rate is Ush 1,800 for 1dolar. How many dollars will he get for
720, 000 Ush?

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5. The crested Forex Bureau is offering the following rates for pound
sterling:
Buy at Ush 1,600
Sell at Ush 1,700
a) How many pounds do you get for Ush 10,000
b) How many shillings would you get for £5000

6. Stella borrows £2,000 for 3 years at a compound interest rate of 5%

per annum. How much money does she repay altogether?

7. Mr. Opio deposited 1.321 million shillings in his bank account at a

compound interest rate of 7.5% per annum. Determine the number of
years his money will take to accumulate to 1.75 million shillings?

8. Okello bought a saloon car in 2003 at Shs 6,500,000. Because of poor

road maintenance, cars depreciate at a rate of 4% p.a. he sold it to
Juma at 90% of its value in December 2005. Calculate the amount of
money Juma paid for the car.

9. Mr. Lwanga and Mr. Okot were each given Uganda shillings 980,000 at
the beginning of 1999. Mr. Lwanga exchanged his money to US dollars
and then banked it on his foreign currency account at a compound
interest rate of 2% per annum while Mr. Okot banked his money
without exchanging it at a compound interest rate of 12% per annum.
The exchange rates in 1999 and 2000 were, Ush 1,250 and Ush 1,500
to a US dollar respectively. If Okot withdrew Shs. 120,000 at the end of
2000:
a) Calculate the amount of money (in Ush) each man had in the bank at
the end of 2000.
b) Who had more money and by how much?

10. Mr. Omona borrowed Shs. 500,000,000 from stanbic bank at 5% p.a
compound interest. After some years, he paid back Shs. 578,813,000
without any additional charge. Find the number of years for which he
borrowed the money.

11. Mr. Ben borrowed 14.8 million shillings to boost his business at a bank
rate of 12% compound interest p.a.

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Mr. Ben has to repay the loan and interest within two years. He is to
repay these bank dues in six equal installments. Calculate:
a) Total amount Mr. Ben paid to the bank
b) Interest Mr. Ben paid to the bank
c) The amount of money Mr. Ben paid per installment.

12. The price of a modern mobile phone is marketed at Shs. 60,000. If

one pays cash, he gets a discount of 5%, but if one buys at a hire
purchase terms, he pays a deposit of half the market price and pays
the rest in monthly installments for 15 months Shs. 2,100 each month.
a) If Mr. Okello opted to pay the phone on cash terms, how much would
he pay?
b) If Jane opted to buy the phone on hire purchase terms, how much
more would she pay than Okello?

13. The deposit for an office chair in hire purchase shop is indicated as
shs. 1,400. The balance is payable in equal installments of shs. 210. A
customer who defaults on an installment is charged a penalty of 10%
of the defaulted installment payable in the next month together with
installments due. Mr. Ojok bought a chair on hire purchase terms and
rd th
paid a deposit. If Mr. Ojok defaulted twice in the 3 and 10 months.
a) i) Calculate the penalty charges that he paid.
ii) What was the total cost of the chair?
b) If Mr. Ojok had paid cash for the chair and was allowed 15% cash
discount, how much money would he have saved?

14. The following advert appeared in the Sunday Vision.

USED COMPUTERS
Price: Shs. 500,000
Terms: (1) Cash: 4% discount
(2) Hire purchase: deposit 45% of marked price then equal
monthly installments of 10% of the marked price for 7
months or Shs. 5,500 per week for 6 weeks.

Find how much a customer saves by paying cash other than hire
purchase on:
a) Monthly basis.
b) Weekly basis.

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15. In a certain school, a teacher’s salary includes the following tax free
allowances
Type of allowance Amount (shs)
Legally married teacher 10,000
Each child under 10 years 2,500
PTA 50,000
Head of department/subject 10,000
Class teacher 5,000
Housemaster/mistress 5,000
Unmarried teacher 6,000
Each child above 10 years 2,000
Mr. Birungi and Mr. Serubiri are senor teachers in a certain school. Mr.
Birungi is married with two children under the age of 10 years and one
child above 10 years. He is also a class teacher and head of commerce
department.
Mr. Serubiri is single but has two children under the age of 10 years
and is also a housemaster and a class teacher.
The gross income at the end of the month are each subjected to a
st
PAYE (pay – as –you – earn) which has the following rate for the 1 shs
10,000 taxable income, the tax is 20% while the rest is taxed at 15% at
the end of the month.
Mr. Birungi’s gross income was shs. 150,000 and Mr. Serubiri’s gross
income was shs. 130,000.
a) Calculate the taxable income for each teacher.
b) Calculate the tax paid as a percentage of the gross income for each
teacher.
16. James works with a certain NGO. James is paid a monthly salary of Shs
750,000. The NGO gives some allowances to each of her employees
earning Shs. 500,000 and above according to the following schedule.
Allowance Rate
Medical 5% of the amount by which the employee’s
monthly salary exceeds shs. 500,000
Lunch 3% of the amount by which the employee’s
monthly salary exceeds shs. 500,000
Transport 4% of the amount by which the employee’s
monthly salary exceeds shs. 500,000
Child allowance (per child 5% of the amount by which the employee’s
aged 11 and below ) monthly salary exceeds shs. 500,000
Child allowance (per child 4% of the amount by which the employee’s
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aged 12 and below 19 monthly salary exceeds shs. 500,000

years)
Electricity Shs. 20,000
Per spouse/wife Shs. 25.000
James has three wives, 6 children aged below 12 years and 3 children
aged 12 and above but under 19. Determine the total amount James
receives from the NGO before taxation

17. The table below shows tax rates for employees of a certain firm.

Total monthly income Rate

Below shs. 130,000 2%
Shs. 130,000 – shs.199,000 20% by which the total monthly
income exceeds shs. 130,000
Shs. 200,000 – shs.299,000 30% by which the total monthly
income exceeds shs. 130,000
Shs. 300,000 and above 40% by which the total monthly
income exceeds shs. 300,000
What tax does an employer whose monthly income is shs. 1,200,000
pay?

18. The table below shows the tax structure on taxable income of
employees in a certain company.
Income per month Tax rate (%)
0 – 40,000 Free
40,001 – 100,000 10.0
100,001 – 200,000 16.5
200,001 – 350,000 23.5
350,001 – 510,000 32.0
Above shs. 510,000 40.0
An employee earns shs. 9,000,000 per month. His allowances include:
Marriage allowance = one–fifteenth of his gross monthly income.
Water and electricity = shs. 180,000 p.a
Relief and insurance = shs. 15,000 per month
Housing allowance = shs. 40,000 per month
Medical allowance = shs. 36,00 per month
Transport allowance = shs.300,000 p.a

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Family allowance for four children only as given below: For children in
the age 0 – 10 years, shs. 12,500 per child, 10 –18 years shs. 8,250 per
child and over 18 years, shs. 5,000 per child.
a) Calculate the man’s taxable income and the income tax he pays given
that he has 3 children two of whom are age 0 –10 years and the other
13 years.
b) Calculate the percentage of his gross income that goes to tax.

19. In Ghana, tax is levied on Government employees after deducting

allowances as follows:
Amount (Shs) Rate
st
1 150,000 5%
Next 100,000 7.5%
Next 150,000 10%
Next 200,000 15%
Next 200,000 25%
Next 200,000 40%
Extra amount 45%
The following are the entitled allowances:
Electricity: Shs. 480,000 per annum.
Housing: Shs. 80,000 per annum.
Medical care: Shs. 840, 000 per annum.
Child care (only two children below 16 years): Shs.15,000 per child.
Given that an unmarried employee is paid shs. 150,000 as monthly
income tax;
Calculate:
a) His monthly taxable income.
b) His gross monthly income.
c) His monthly net income.

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