Question Tag: Assessable Profit

Search 500 + past questions and counting.

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

Question

a. The administration of the Petroleum Profits Tax Act is under the charge and management of the Federal Inland Revenue Service with respect to Petroleum Profits Tax Act Cap P13 LFN 2004.

You are required to explain:
i. Associated Gas (2 Marks)
ii. Downstream Activities (2 Marks)

b. Bivenette Petroleum Company Limited has been in the oil prospecting business for some years. Extracts from the financial statements for the year ended December 31, 2013, show the following information:

Details	Amount (₦’000)
Value of oil exported	1,030,000
Domestic sales	842,000
Chargeable gas sales	603,000
Other income	425,000
Operating costs	1,385,000
Intangible costs	142,800
Royalty on export sales	125,000
Royalty on local sales	96,500
Non-productive rent	102,000
Exploration incentives	313,500
Rental	101,200
Interest paid	98,000
Administrative expenses	265,000

Additional Information:
(i) The Petroleum Profits Tax rate is 85%.
(ii) Interest paid included ₦12,000,000 paid to an affiliated company.
(iii) Capital allowances were agreed at ₦253,750,000.
(iv) Included in the operating cost is ₦302,000,000 paid to a company for information on oil prospect in Adamawa State.
(v) The company is entitled to Investment Allowance of ₦173,000,000.

Required:
Determine the Assessable Profit, Chargeable Profit, Assessable Tax, and Chargeable Tax of the company for the relevant Year of Assessment. (11 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Associated Gas, Chargeable Profit, Downstream Activities, Investment Allowance
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: NOV 2016

ATAX – Nov 2016 – L3 – Q6b – Petroleum Profits Tax (PPT)

Determines assessable profit, chargeable profit, assessable tax, and chargeable tax for Bivenette Petroleum Company Limited.

Question

Bivenette Petroleum Company Limited has been in the oil prospecting business for some years. Extracts from its financial statements for the year ended December 31, 2013 show the following information:

Additional Information:

Petroleum Profits Tax rate: 85%
Interest paid includes N12,000,000 paid to an affiliated company.
Capital allowances agreed at N253,750,000.
Operating costs include N302,000,000 paid to a company for information on oil prospect in Adamawa State.
The company is entitled to an Investment Allowance of N173,000,000.

You are required to:

Determine the Assessable Profit, Chargeable Profit, Assessable Tax, and Chargeable Tax of the company for the relevant Year of Assessment. (11 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Tax, Investment Allowance, Oil and gas, Petroleum Profits Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

ATAX – Nov 2021 – L3 – Q2 – Petroleum Profits Tax (PPT)

Tax computation for Debby Oil Limited, including adjustments, capital allowances, and tertiary education tax.

Question

Debby Oil Limited is an oil prospecting company that has been operating in the deep ocean of the Niger Delta since 1990. The company makes up its accounts to December 31 each year.

The company is in discussion with a consortium of five deposit money banks in Nigeria for the purposes of taking a medium-term (5 years) loan facility of USD 5 million to finance further expansion of its facilities and acquisition of a marginal field. As part of the documents required by the banks for processing the loan facility are the audited financial statements and tax computations for the last five financial years. The company is yet to submit the documents for the year ended December 31, 2020, to the consortium.

The extract from its activities for the year ended December 31, 2020, is as presented below:

Item	Amount (₦’000)
Oil inventory (Jan 1, 2020)	1,220,000
Oil inventory (Dec 31, 2020)	1,380,000
Sales – Export	9,524,000
Sales – Local	2,900,500
Other income	1,235,300
Production cost	3,440,000
Operating expenses	1,789,600
Intangible drilling cost	1,425,200
Tangible drilling cost	532,000
Traveling expenses	54,000
Salaries and wages	1,860,000
Pension fund contribution	175,000
Loan interest	150,000
General expenses	800,500
Depreciation	170,000
Royalties and production rentals	810,000
Donation	20,000
Bank charges	25,300
Harbour dues	15,000
Non-productive rent	350,000
Audit and accountancy fees	28,000
Customs duty on essentials	7,300
Income tax provision	865,860
Transfer to general reserves	900,000

Additional Information:

Posted prices of crude oil exported is USD 35 per barrel at the standard API gravity of 32°.
Actual realised price is adjusted for deviation from the standard API gravity. Each degree change in API results in a price adjustment of USD 0.20.
650,000 barrels of crude oil were exported during the year with an API gravity of 34°.
Other income of ₦735 million was generated from the company’s ocean tanker business. Associated expenses of ₦580.5 million were included in general expenses.
Operating expenses included ₦9 million for short lease renewal.
Pension fund contributions were approved by the State Internal Revenue Service.
Loan interest included ₦78 million paid to a subsidiary company, approved by the board.
A new pipeline and storage tank costing ₦150 million was acquired for offshore operations in a 180-meter deep area.
Transfer to general reserves was board-approved.
Capital allowances agreed with the tax authorities include an annual allowance of ₦120 million and a balancing charge of ₦8 million.
Assume USD 1 is equivalent to ₦420.

Required:
As the company’s Assistant Tax Manager, draft a report to the Tax Manager showing the company’s tax liability for the relevant assessment year according to the Petroleum Profits Tax Act, Cap P.13, Laws of the Federation of Nigeria 2004 (as amended).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Assessable Profit, Capital allowances, Petroleum Profits Tax, Tax Liability Computation
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – May – 2018 – L3 – SC – Q5b – Petroleum Profits Tax (PPT)

Tax computation for Ayokunle Oil Nigeria Ltd., a petroleum company, including assessable and chargeable profit based on expenses and sales.

Question

Ayokunle Oil Nigeria Limited engages in petroleum operations. The company was incorporated in 2005 but commenced business in January 2010. It operates in the continental shelf at a water depth of 155 metres. The company makes up its accounts to December 31 each year.

The company has presented the following statement of activities for the year ended December 31, 2016:

Sales of crude oil:
- Exported at $52 per barrel: 120,500 barrels
- Domestic at N12,250 per barrel: 70,000 barrels
Chargeable natural gas sold: N300,800,000
Income from other sources: N6,770,000

Expenses incurred:

Expense Type	Amount (₦)
Operating costs	523,750
Non-productive rent	110,420
Intangible drilling cost	439,000
Custom duty	53,200
Salaries and other personnel costs	280,500
Interest paid	50,410
Royalty on oil exported	110,600
Royalty on local sales	41,200
Stamp duty	1,050
Donations	22,000
Transportation	72,070
Administration and general expenses	340,200
Bad debts	66,000
Pension contribution	21,000
Miscellaneous expenses	32,170

Additional Information:

Capital allowances were agreed at ₦133,000,000.
Plant and storage tank acquired and used during the year amounted to ₦80,000,000.
Depreciation of ₦105,000,000 was included in operating costs.
Custom duty on plant and storage tank, ₦2,250,000, was included in miscellaneous expenses.
70% of custom duty was on essential items.
The average exchange rate during the period was ₦365 to $1 (USA).

Required:

Determine for the relevant assessment year the following:

a. Assessable Profit (7 Marks)
b. Chargeable Profit (3 Marks)
c. Chargeable Tax (1 Mark)

(Total 15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Natural Gas, Depreciation Adjustments, Petroleum Profits Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: MAY 2018

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

Question

Ibrahim Oil Nigeria Limited is an oil prospecting company which commenced production in commercial quantity in 2008. Its accounting year end is December 31. The company has provided the following Statement of Profit or Loss for the year ended December 31, 2016:

Description	Amount (N’000)
Revenue (value of oil produced)	2,455,200
Operating costs	(952,500)
Non-productive rent	(63,200)
Royalty on export sales	(14,775)
Depreciation of Property Plant and Equipment	(65,400)
Tangible drilling cost	(53,800)
Donation	(2,500)
Stamp duties	(1,250)
Repairs and renewal of machinery	(2,000)
Exploration and drilling costs	(100,300)
Custom duties on Plant and Machinery	(1,130)
Bad and doubtful debts	(26,500)
Pension and provident funds	(30,600)
Interest paid	(26,200)
General expenses	(11,050)
Income tax provision	(120,000)
Net Profit	983,995

Additional Information:

Exploration and drilling costs are itemized for various wells totaling 100,300 N’000.
A breakdown of bad debts shows 16,500 N’000 as specific provision.
Capital allowances are agreed at N88,100,000.

Required: Determine for the relevant assessment year, the following:

(i) Assessable Profit (9 Marks)
(ii) Chargeable Profit (3 Marks)
(iii) Chargeable Tax (2 Marks)
(iv) Total Tax Liability (1 Mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Profit, Chargeable Tax, Export Sales, Petroleum Profits Tax Act
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: MAY 2018

AT – Nov 2022 – L3 – Q2 – Petroleum Profits Tax (PPT)

Calculate Colamrud Petroleum’s adjusted and assessable profit for Q1 2022 based on allowable and non-allowable expenses under the Petroleum Industry Act 2021, and comment on the company's cost-price ratio in relation to regulatory standards.

Question

Colamrud Petroleum (Nigeria) Limited, a subsidiary of a foreign oil and gas company, has been engaged in petroleum prospecting and exploration (upstream) operations for both local and foreign markets for over a decade. As part of corporate policy, the management reviews the quarterly performance reports in board meetings. Below is the financial summary for the first quarter (January – March) 2022, prepared by the Finance Controller:

Income (N’000):

Value of oil sold (export): 900,380
Value of oil sold (local): 223,300
Value of gas sold: 430,100
Other income: 7,200
Gross revenue: 1,560,980

Expenses (N’000):

Production cost: 210,730
Tangible drilling cost (first appraisal well): 18,800
Intangible drilling cost (first appraisal well): 17,600
Cost of gas reinjection wells: 4,000
Cost of drilling 3 appraisal wells: 24,000
Rent: 13,000
Royalties on export sales: 69,300
Royalties on local sales: 9,800
Salaries and wages: 170,500
Head office shared costs: 62,000
Repairs and maintenance: 8,930
Customs duty on essentials: 2,900
Depreciation: 66,000
Interest on loans: 4,400
Allowance for doubtful debts: 34,000
Administrative expenses: 79,200
Stamp duties on increase in share capital: 1,000
Bank charges: 900
Miscellaneous expenses: 22,500
Income tax provision: 90,000
Tertiary education tax provision: 6,000
Total expenses: 915,560
Net profit: 645,420

Additional Information:

Fiscal oil and gas prices were approved on an export parity basis by the Nigerian Upstream Petroleum Regulatory Commission.
Head office shared costs:
- Research and development costs: 12,000
- Indirect production costs: 50,000
Repairs and maintenance:
- Repairs of oil pipelines and storage tanks: 6,000
- Repairs of plant: 1,500
- Improvement to building: 1,430
Allowance for doubtful debts:
- Specific provision: 10,000
- General provision: 20,000
- Bad debt written off: 4,000
Administrative expenses:
- Natural gas flare fees: 10,000
- Transport cost: 13,200
- Cost of obtaining information on oil existence: 7,300
- Expenditure for acquisition of geological information: 14,900
- Other allowable expenses: 33,800
Miscellaneous expenses:
- Tenement levy paid to local government: 2,000
- Contribution to Niger Delta Development fund: 5,500
- Contribution to Host Community Development fund: 12,000
- Donation to widows and orphans association: 3,000
Unabsorbed losses brought forward: 35,000

Required:

As the company’s Assistant Tax Manager, prepare a report for the Tax Manager that includes:

Adjusted Profit and Assessable Profit: Calculate the adjusted profit and assessable profit for the first quarter of 2022 in line with the Petroleum Industry Act 2021.
(18 Marks)
Cost-Price Ratio Commentary: Provide comments on the cost-price ratio of the company, referencing the Sixth Schedule of the Petroleum Industry Act 2021.
(2 Marks)

Total: 20 Marks

Answer

Find Related Questions by Tags, levels, etc.

Topic: Petroleum Profits Tax (PPT)
Series: NOV 2022

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

Question

Skkye Petroleum Plc. began operations over ten years ago and uses December 31 as its accounting date. The following details were extracted from the accounting records for the year ended December 31, 2016:

Crude oil exported – 3,500,000 barrels
Crude oil used locally – 1,200,000 barrels at N100 per barrel
Incidental income from petroleum operations – ₦26,750,000
Exploration and drilling costs – ₦30,000,000
Management and administration expenses – ₦240,500,000
Non-productive rents – ₦8,300,000
Provision for bad debts:
- General – ₦7,500,000
- Specific – ₦11,200,000
Depreciation – ₦7,250,000
Losses brought forward – ₦13,200,000

Qualifying capital expenditures:

Pipeline and storage tanks (March 2016, Continental Shelf, 190 meters depth) – ₦48,000,000
Plant and machinery (June 2014, Territorial Waters, 90 meters depth) – ₦63,800,000
Furniture and fittings (May 2013, Territorial Waters, 95 meters depth) – ₦21,000,000
Buildings (April 2015, onshore) – ₦71,000,000

Breakdown of Management and Administration expenses:

Donations to XYZ Political Party – ₦8,500,000
Expenditure on information regarding petroleum deposits – ₦4,700,000
Companies income tax of an associated company – ₦5,000,000
Interest on inter-company loans (market terms) – ₦2,600,000
Staff salaries – ₦175,000,000
Royalties on export sales – ₦6,200,000
Repairs and renewals on PPE for petroleum operations – ₦2,900,000
Rent for land/buildings under an Oil Prospecting License – ₦3,600,000
Other administrative expenses – ₦32,000,000

The international market price of crude oil in 2016 was USD $75 per barrel, with an exchange rate of USD $1 = ₦280.

Required:
a. Compute the assessable profit.
b. Compute the chargeable profit.
c. Compute the assessable tax.
d. Compute the chargeable tax.
e. Compute the Tertiary Education Tax.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Chargeable Profit, Petroleum Operations, Tax computation, Tertiary Education Tax
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2017

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Question

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

Even with the increase in profits in 2011 and 2012, the Managing Director was of the opinion that it is better to cut the company’s losses, once and for all, by winding-up the company. However, the Finance Director disagreed and argued that since the company’s performance was now improving, it should continue to operate.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year	Profits (₦)
Year ended 31 May 2009	540,000
Year ended 31 May 2010	300,000
Seven months to 31 December 2010	645,000
Year ended 31 December 2011	1,575,000
Year ended 31 December 2012	1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

a. Identify the steps involved in the event that HOPEFUL Limited adopts the change of accounting date. (6 Marks)
b. Compute the Assessable profits for 2011 – 2013, if the option to change accounting date is accepted, using both the old and the new dates. (7 Marks)
c. Compute the Assessable profits for the relevant years if the cessation option is accepted using the normal basis and the revised basis of assessment. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Change of Accounting Date, Companies Income Tax, Financial Accounting, Tax computation, Tax Planning
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates

Compute the assessable profit for XYZ Unit Trust Scheme for the year ended December 31, 2018.

Question

In 2004, Chief Kris Uzodime applied to the Securities and Exchange Commission (SEC) for an approval to float XYZ Unit Trust Scheme. In 2005, XYZ Unit Trust Scheme secured an approval to deal in the business of a unit trust scheme.

Its statement of profit or loss for the year ended December 31, 2018, revealed the following:

Description	Amount (N)
Investment income
Rental income (gross)	12,650,000
Interest on bank deposit (gross)	5,140,000
Dividend received (gross)	16,300,000
Total Investment Income	34,090,000

Less:
Staff salaries and wages	9,300,000
Manager’s remuneration (20% of gross income)	6,818,000
Other expenses	1,020,000
Bank charges and commission	170,500
Depreciation	321,600
Total Expenses	17,630,100
Net profit	16,459,900

Additional information:
(i) Other expenses include:

Loss on disposal of property, plant and equipment: N121,000
Preliminary expenses: N210,000
Office furniture acquired: N300,500

(ii) All the incomes were subjected to deductions of withholding tax.

Required:
Compute the assessable profit for the relevant assessment year.
(9 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Profit and Loss, Tax computation, Unit Trust Scheme, Withholding Tax
Level: Level 1

Topic: Taxation of Trusts and Estates
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q1a – Taxation of Partnerships and Sole Proprietorships

Compute the assessable profit or loss for Kayode Oluwa Enterprises for the relevant years.

Question

a. Mr. Kayode Oluwa, a civil engineer, worked for XYZ Nigeria Limited for many years. He retired as the Chief Civil Engineer in 2010. He registered his enterprise under the name of Kayode Oluwa Enterprises and commenced business in 2011.

He appointed you as his tax consultant and submitted his financial records showing the following results:

Year Ended December 31	Amount (N)
2015	1,360,000
2016	(1,900,000)
2017	2,300,000
2018	2,700,000

Required:
Compute the assessable profit/(loss) for the relevant years of assessment. (12 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Financial Records, Loss carry forward, Sole Proprietorship, Tax computation
Level: Level 1

Topic: Taxation of Partnerships and Sole Proprietorships
Series: NOV 2020

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

Question

a. The administration of the Petroleum Profits Tax Act is under the charge and management of the Federal Inland Revenue Service with respect to Petroleum Profits Tax Act Cap P13 LFN 2004.

You are required to explain:
i. Associated Gas (2 Marks)
ii. Downstream Activities (2 Marks)

Details	Amount (₦’000)
Value of oil exported	1,030,000
Domestic sales	842,000
Chargeable gas sales	603,000
Other income	425,000
Operating costs	1,385,000
Intangible costs	142,800
Royalty on export sales	125,000
Royalty on local sales	96,500
Non-productive rent	102,000
Exploration incentives	313,500
Rental	101,200
Interest paid	98,000
Administrative expenses	265,000

Required:
Determine the Assessable Profit, Chargeable Profit, Assessable Tax, and Chargeable Tax of the company for the relevant Year of Assessment. (11 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Associated Gas, Chargeable Profit, Downstream Activities, Investment Allowance
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: NOV 2016

ATAX – Nov 2016 – L3 – Q6b – Petroleum Profits Tax (PPT)

Determines assessable profit, chargeable profit, assessable tax, and chargeable tax for Bivenette Petroleum Company Limited.

Question

Additional Information:

Petroleum Profits Tax rate: 85%
Interest paid includes N12,000,000 paid to an affiliated company.
Capital allowances agreed at N253,750,000.
Operating costs include N302,000,000 paid to a company for information on oil prospect in Adamawa State.
The company is entitled to an Investment Allowance of N173,000,000.

You are required to:

Determine the Assessable Profit, Chargeable Profit, Assessable Tax, and Chargeable Tax of the company for the relevant Year of Assessment. (11 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Tax, Investment Allowance, Oil and gas, Petroleum Profits Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

ATAX – Nov 2021 – L3 – Q2 – Petroleum Profits Tax (PPT)

Tax computation for Debby Oil Limited, including adjustments, capital allowances, and tertiary education tax.

Question

Debby Oil Limited is an oil prospecting company that has been operating in the deep ocean of the Niger Delta since 1990. The company makes up its accounts to December 31 each year.

The extract from its activities for the year ended December 31, 2020, is as presented below:

Item	Amount (₦’000)
Oil inventory (Jan 1, 2020)	1,220,000
Oil inventory (Dec 31, 2020)	1,380,000
Sales – Export	9,524,000
Sales – Local	2,900,500
Other income	1,235,300
Production cost	3,440,000
Operating expenses	1,789,600
Intangible drilling cost	1,425,200
Tangible drilling cost	532,000
Traveling expenses	54,000
Salaries and wages	1,860,000
Pension fund contribution	175,000
Loan interest	150,000
General expenses	800,500
Depreciation	170,000
Royalties and production rentals	810,000
Donation	20,000
Bank charges	25,300
Harbour dues	15,000
Non-productive rent	350,000
Audit and accountancy fees	28,000
Customs duty on essentials	7,300
Income tax provision	865,860
Transfer to general reserves	900,000

Additional Information:

Posted prices of crude oil exported is USD 35 per barrel at the standard API gravity of 32°.
Actual realised price is adjusted for deviation from the standard API gravity. Each degree change in API results in a price adjustment of USD 0.20.
650,000 barrels of crude oil were exported during the year with an API gravity of 34°.
Other income of ₦735 million was generated from the company’s ocean tanker business. Associated expenses of ₦580.5 million were included in general expenses.
Operating expenses included ₦9 million for short lease renewal.
Pension fund contributions were approved by the State Internal Revenue Service.
Loan interest included ₦78 million paid to a subsidiary company, approved by the board.
A new pipeline and storage tank costing ₦150 million was acquired for offshore operations in a 180-meter deep area.
Transfer to general reserves was board-approved.
Capital allowances agreed with the tax authorities include an annual allowance of ₦120 million and a balancing charge of ₦8 million.
Assume USD 1 is equivalent to ₦420.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Assessable Profit, Capital allowances, Petroleum Profits Tax, Tax Liability Computation
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – May – 2018 – L3 – SC – Q5b – Petroleum Profits Tax (PPT)

Tax computation for Ayokunle Oil Nigeria Ltd., a petroleum company, including assessable and chargeable profit based on expenses and sales.

Question

The company has presented the following statement of activities for the year ended December 31, 2016:

Sales of crude oil:
- Exported at $52 per barrel: 120,500 barrels
- Domestic at N12,250 per barrel: 70,000 barrels
Chargeable natural gas sold: N300,800,000
Income from other sources: N6,770,000

Expenses incurred:

Expense Type	Amount (₦)
Operating costs	523,750
Non-productive rent	110,420
Intangible drilling cost	439,000
Custom duty	53,200
Salaries and other personnel costs	280,500
Interest paid	50,410
Royalty on oil exported	110,600
Royalty on local sales	41,200
Stamp duty	1,050
Donations	22,000
Transportation	72,070
Administration and general expenses	340,200
Bad debts	66,000
Pension contribution	21,000
Miscellaneous expenses	32,170

Additional Information:

Capital allowances were agreed at ₦133,000,000.
Plant and storage tank acquired and used during the year amounted to ₦80,000,000.
Depreciation of ₦105,000,000 was included in operating costs.
Custom duty on plant and storage tank, ₦2,250,000, was included in miscellaneous expenses.
70% of custom duty was on essential items.
The average exchange rate during the period was ₦365 to $1 (USA).

Required:

Determine for the relevant assessment year the following:

a. Assessable Profit (7 Marks)
b. Chargeable Profit (3 Marks)
c. Chargeable Tax (1 Mark)

(Total 15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Natural Gas, Depreciation Adjustments, Petroleum Profits Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: MAY 2018

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

Question

Description	Amount (N’000)
Revenue (value of oil produced)	2,455,200
Operating costs	(952,500)
Non-productive rent	(63,200)
Royalty on export sales	(14,775)
Depreciation of Property Plant and Equipment	(65,400)
Tangible drilling cost	(53,800)
Donation	(2,500)
Stamp duties	(1,250)
Repairs and renewal of machinery	(2,000)
Exploration and drilling costs	(100,300)
Custom duties on Plant and Machinery	(1,130)
Bad and doubtful debts	(26,500)
Pension and provident funds	(30,600)
Interest paid	(26,200)
General expenses	(11,050)
Income tax provision	(120,000)
Net Profit	983,995

Additional Information:

Exploration and drilling costs are itemized for various wells totaling 100,300 N’000.
A breakdown of bad debts shows 16,500 N’000 as specific provision.
Capital allowances are agreed at N88,100,000.

Required: Determine for the relevant assessment year, the following:

(i) Assessable Profit (9 Marks)
(ii) Chargeable Profit (3 Marks)
(iii) Chargeable Tax (2 Marks)
(iv) Total Tax Liability (1 Mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Profit, Chargeable Tax, Export Sales, Petroleum Profits Tax Act
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: MAY 2018

AT – Nov 2022 – L3 – Q2 – Petroleum Profits Tax (PPT)

Calculate Colamrud Petroleum’s adjusted and assessable profit for Q1 2022 based on allowable and non-allowable expenses under the Petroleum Industry Act 2021, and comment on the company's cost-price ratio in relation to regulatory standards.

Question

Income (N’000):

Value of oil sold (export): 900,380
Value of oil sold (local): 223,300
Value of gas sold: 430,100
Other income: 7,200
Gross revenue: 1,560,980

Expenses (N’000):

Production cost: 210,730
Tangible drilling cost (first appraisal well): 18,800
Intangible drilling cost (first appraisal well): 17,600
Cost of gas reinjection wells: 4,000
Cost of drilling 3 appraisal wells: 24,000
Rent: 13,000
Royalties on export sales: 69,300
Royalties on local sales: 9,800
Salaries and wages: 170,500
Head office shared costs: 62,000
Repairs and maintenance: 8,930
Customs duty on essentials: 2,900
Depreciation: 66,000
Interest on loans: 4,400
Allowance for doubtful debts: 34,000
Administrative expenses: 79,200
Stamp duties on increase in share capital: 1,000
Bank charges: 900
Miscellaneous expenses: 22,500
Income tax provision: 90,000
Tertiary education tax provision: 6,000
Total expenses: 915,560
Net profit: 645,420

Additional Information:

Fiscal oil and gas prices were approved on an export parity basis by the Nigerian Upstream Petroleum Regulatory Commission.
Head office shared costs:
- Research and development costs: 12,000
- Indirect production costs: 50,000
Repairs and maintenance:
- Repairs of oil pipelines and storage tanks: 6,000
- Repairs of plant: 1,500
- Improvement to building: 1,430
Allowance for doubtful debts:
- Specific provision: 10,000
- General provision: 20,000
- Bad debt written off: 4,000
Administrative expenses:
- Natural gas flare fees: 10,000
- Transport cost: 13,200
- Cost of obtaining information on oil existence: 7,300
- Expenditure for acquisition of geological information: 14,900
- Other allowable expenses: 33,800
Miscellaneous expenses:
- Tenement levy paid to local government: 2,000
- Contribution to Niger Delta Development fund: 5,500
- Contribution to Host Community Development fund: 12,000
- Donation to widows and orphans association: 3,000
Unabsorbed losses brought forward: 35,000

Required:

As the company’s Assistant Tax Manager, prepare a report for the Tax Manager that includes:

Adjusted Profit and Assessable Profit: Calculate the adjusted profit and assessable profit for the first quarter of 2022 in line with the Petroleum Industry Act 2021.
(18 Marks)
Cost-Price Ratio Commentary: Provide comments on the cost-price ratio of the company, referencing the Sixth Schedule of the Petroleum Industry Act 2021.
(2 Marks)

Total: 20 Marks

Answer

Find Related Questions by Tags, levels, etc.

Topic: Petroleum Profits Tax (PPT)
Series: NOV 2022

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

Question

Crude oil exported – 3,500,000 barrels
Crude oil used locally – 1,200,000 barrels at N100 per barrel
Incidental income from petroleum operations – ₦26,750,000
Exploration and drilling costs – ₦30,000,000
Management and administration expenses – ₦240,500,000
Non-productive rents – ₦8,300,000
Provision for bad debts:
- General – ₦7,500,000
- Specific – ₦11,200,000
Depreciation – ₦7,250,000
Losses brought forward – ₦13,200,000

Qualifying capital expenditures:

Pipeline and storage tanks (March 2016, Continental Shelf, 190 meters depth) – ₦48,000,000
Plant and machinery (June 2014, Territorial Waters, 90 meters depth) – ₦63,800,000
Furniture and fittings (May 2013, Territorial Waters, 95 meters depth) – ₦21,000,000
Buildings (April 2015, onshore) – ₦71,000,000

Breakdown of Management and Administration expenses:

Donations to XYZ Political Party – ₦8,500,000
Expenditure on information regarding petroleum deposits – ₦4,700,000
Companies income tax of an associated company – ₦5,000,000
Interest on inter-company loans (market terms) – ₦2,600,000
Staff salaries – ₦175,000,000
Royalties on export sales – ₦6,200,000
Repairs and renewals on PPE for petroleum operations – ₦2,900,000
Rent for land/buildings under an Oil Prospecting License – ₦3,600,000
Other administrative expenses – ₦32,000,000

The international market price of crude oil in 2016 was USD $75 per barrel, with an exchange rate of USD $1 = ₦280.

Required:
a. Compute the assessable profit.
b. Compute the chargeable profit.
c. Compute the assessable tax.
d. Compute the chargeable tax.
e. Compute the Tertiary Education Tax.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Chargeable Profit, Petroleum Operations, Tax computation, Tertiary Education Tax
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2017

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Question

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year	Profits (₦)
Year ended 31 May 2009	540,000
Year ended 31 May 2010	300,000
Seven months to 31 December 2010	645,000
Year ended 31 December 2011	1,575,000
Year ended 31 December 2012	1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Change of Accounting Date, Companies Income Tax, Financial Accounting, Tax computation, Tax Planning
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates

Compute the assessable profit for XYZ Unit Trust Scheme for the year ended December 31, 2018.

Question

Its statement of profit or loss for the year ended December 31, 2018, revealed the following:

Description	Amount (N)
Investment income
Rental income (gross)	12,650,000
Interest on bank deposit (gross)	5,140,000
Dividend received (gross)	16,300,000
Total Investment Income	34,090,000

Less:
Staff salaries and wages	9,300,000
Manager’s remuneration (20% of gross income)	6,818,000
Other expenses	1,020,000
Bank charges and commission	170,500
Depreciation	321,600
Total Expenses	17,630,100
Net profit	16,459,900

Additional information:
(i) Other expenses include:

Loss on disposal of property, plant and equipment: N121,000
Preliminary expenses: N210,000
Office furniture acquired: N300,500

(ii) All the incomes were subjected to deductions of withholding tax.

Required:
Compute the assessable profit for the relevant assessment year.
(9 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Profit and Loss, Tax computation, Unit Trust Scheme, Withholding Tax
Level: Level 1

Topic: Taxation of Trusts and Estates
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q1a – Taxation of Partnerships and Sole Proprietorships

Compute the assessable profit or loss for Kayode Oluwa Enterprises for the relevant years.

Question

He appointed you as his tax consultant and submitted his financial records showing the following results:

Year Ended December 31	Amount (N)
2015	1,360,000
2016	(1,900,000)
2017	2,300,000
2018	2,700,000

Required:
Compute the assessable profit/(loss) for the relevant years of assessment. (12 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Financial Records, Loss carry forward, Sole Proprietorship, Tax computation
Level: Level 1

Topic: Taxation of Partnerships and Sole Proprietorships
Series: NOV 2020

Question Tag: Assessable Profit

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

You're reporting an error for "AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)"

ATAX – Nov 2016 – L3 – Q6b – Petroleum Profits Tax (PPT)

Determines assessable profit, chargeable profit, assessable tax, and chargeable tax for Bivenette Petroleum Company Limited.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q6b – Petroleum Profits Tax (PPT)"

ATAX – Nov 2021 – L3 – Q2 – Petroleum Profits Tax (PPT)

Tax computation for Debby Oil Limited, including adjustments, capital allowances, and tertiary education tax.

You're reporting an error for "ATAX – Nov 2021 – L3 – Q2 – Petroleum Profits Tax (PPT)"

AT – May – 2018 – L3 – SC – Q5b – Petroleum Profits Tax (PPT)

Tax computation for Ayokunle Oil Nigeria Ltd., a petroleum company, including assessable and chargeable profit based on expenses and sales.

You're reporting an error for "AT – May – 2018 – L3 – SC – Q5b – Petroleum Profits Tax (PPT)"

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

You're reporting an error for "AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)"

AT – Nov 2022 – L3 – Q2 – Petroleum Profits Tax (PPT)

Calculate Colamrud Petroleum’s adjusted and assessable profit for Q1 2022 based on allowable and non-allowable expenses under the Petroleum Industry Act 2021, and comment on the company's cost-price ratio in relation to regulatory standards.

You're reporting an error for "AT – Nov 2022 – L3 – Q2 – Petroleum Profits Tax (PPT)"

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

You're reporting an error for "AT – Nov 2017 – L3 – Q2 – Taxation of Companies"

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

You're reporting an error for "TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)"

TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates

Compute the assessable profit for XYZ Unit Trust Scheme for the year ended December 31, 2018.

You're reporting an error for "TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates"

TAX – Nov 2020 – L1 – SA – Q1a – Taxation of Partnerships and Sole Proprietorships

Compute the assessable profit or loss for Kayode Oluwa Enterprises for the relevant years.

You're reporting an error for "TAX – Nov 2020 – L1 – SA – Q1a – Taxation of Partnerships and Sole Proprietorships"

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

You're reporting an error for "AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)"

ATAX – Nov 2016 – L3 – Q6b – Petroleum Profits Tax (PPT)

Determines assessable profit, chargeable profit, assessable tax, and chargeable tax for Bivenette Petroleum Company Limited.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q6b – Petroleum Profits Tax (PPT)"

ATAX – Nov 2021 – L3 – Q2 – Petroleum Profits Tax (PPT)

Tax computation for Debby Oil Limited, including adjustments, capital allowances, and tertiary education tax.

You're reporting an error for "ATAX – Nov 2021 – L3 – Q2 – Petroleum Profits Tax (PPT)"

AT – May – 2018 – L3 – SC – Q5b – Petroleum Profits Tax (PPT)

Tax computation for Ayokunle Oil Nigeria Ltd., a petroleum company, including assessable and chargeable profit based on expenses and sales.

You're reporting an error for "AT – May – 2018 – L3 – SC – Q5b – Petroleum Profits Tax (PPT)"

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

You're reporting an error for "AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)"

AT – Nov 2022 – L3 – Q2 – Petroleum Profits Tax (PPT)

Calculate Colamrud Petroleum’s adjusted and assessable profit for Q1 2022 based on allowable and non-allowable expenses under the Petroleum Industry Act 2021, and comment on the company's cost-price ratio in relation to regulatory standards.

You're reporting an error for "AT – Nov 2022 – L3 – Q2 – Petroleum Profits Tax (PPT)"

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

You're reporting an error for "AT – Nov 2017 – L3 – Q2 – Taxation of Companies"

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

You're reporting an error for "TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)"

TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates

Compute the assessable profit for XYZ Unit Trust Scheme for the year ended December 31, 2018.

You're reporting an error for "TAX – Nov 2020 – L1 – SA – Q2b – Taxation of Trusts and Estates"

TAX – Nov 2020 – L1 – SA – Q1a – Taxation of Partnerships and Sole Proprietorships

Compute the assessable profit or loss for Kayode Oluwa Enterprises for the relevant years.

You're reporting an error for "TAX – Nov 2020 – L1 – SA – Q1a – Taxation of Partnerships and Sole Proprietorships"

Our offerings

Contact Info

Customer

Get In Touch

admin