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  • 15 Marks

ATAX – May 2016 – L3 – Q5 – Taxation of Companies

Compute the original and revised tax liabilities of Atlas Nigeria Limited, considering tax official adjustments.

Atlas Nigeria Limited is into the sale of Mobile Phones, and the company’s year-end is December 31 of each year. The company’s Annual Tax Returns for the year ended December 31, 2012, were submitted in January 2014. Tax officials found a number of irregularities during a routine examination of the Tax Returns. They discovered that trade payables included N940,000 representing VAT for the two months to December 31, 2012. All sales attract VAT. There was no Input VAT during 2012. Tax officials were, however, of the opinion that the income of the company accrued uniformly throughout the 12 months of the year.

The accounts showed Adjusted Profits of N44,062,500, and Capital Allowances totaled N33,025,000. The tax liability arrived at was N4,406,250. The tax officials were not satisfied with the explanations received in connection with the Withholding Tax on the Director’s fee of N1,562,500, as well as Consultancy fee of N812,500. They also decided to write back 2/3 of the following expenses:

  • Printing and Stationery N168,750
  • Donations and Subscription N1,320,620
  • Losses claimed, amounting to N128,025 was disallowed. Included in the adjusted profit figure is N6,962,500 for Depreciation.

REQUIRED:

i. Show the computations resulting in the Original Tax Liability of N4,406,250 (5 marks)

ii. Compute a revised Tax liability based on the findings of the Tax Officials (10 marks)

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  • 30 Marks

ATAX – May 2022 – L3 – Q1 – Taxation of Companies

Determination of tax liabilities, treatment of donations, and exemptions of dividends based on CIT Act provisions.

Dadinkowa Nigeria Limited has been in business since 2009 as a manufacturer of sugar cubes. The company sources its raw materials, sugar cane, from the Northern part of the country. However, due to local security challenges, the company has faced supply disruptions since 2016.

Additionally, the company has disagreements with tax authorities regarding the treatment of certain items (e.g., donations and dividend income) in their financial statements and returns. High overhead costs, especially energy expenses, have worsened operational challenges.

At a recent board meeting, the directors proposed either a temporary closure or relocating to a neighboring country if conditions do not improve in the next fiscal year. The General Manager shared this with you during your visit as the company’s tax consultant, seeking your advice to address these issues.

A scheduled meeting with the Managing Director requires you to prepare a comprehensive tax report addressing:

  1. Determination of the company’s tax liabilities for the relevant tax year.
  2. Analysis of the treatment of donations and exemptions of dividend income under the Companies Income Tax Act (CITA).

The profit or loss account for the year ended December 31, 2021, is as follows:

Profit or Loss Account:

Extract from the company’s statement of financial position as at December 31, 2021 revealed:

The following additional information was made available:

(v) Interest on loan was paid on a facility obtained from a licensed Nigerian deposit money bank at commercial interest rate.
(vi) General and administrative expenses were made up of:

(vii) Donations and subscriptions
Included in donations was N12,000,000 paid to a fund created by the Federal Government for victims of communal crisis that took place where the company is situated.
(viii) The tax written down values of the qualifying capital expenditure (QCE) items as at December 31, 2020 were:

(ix) Additions to QCEs during the year ended December 31, 2021 were:

(x) Unrelieved capital allowances brought forward were N15,200,000.
(xi) Unabsorbed losses from previous years were:

Required:

As the company’s Tax Consultant, you are to draft a report to the Managing Director for the scheduled meeting expected to hold next week. This is expected to address the following:
a. Determination of the company’s tax liabilities for the relevant tax year. (20 Marks)
b. Comment, in line with the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended) on:
i. The treatment of donations made by the company during the year under review (5 Marks)
ii. Exemption of dividends from taxation (5 Marks)

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  • 30 Marks

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Soft Farm and Agro-Allied Limited, a subsidiary of Emperor Agro Incorporated, Italy, was incorporated in Nigeria in January 2018. Soft Farm and Agro-Allied Limited produces palm kernel for domestic use and export to the European market. The Managing Director of the company has just received a letter from the head office (parent company) about an impending visit due to poor business performance (below the group’s return on investment benchmark of 25%) since the business commenced, despite financial and technical support from the parent company.

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

The Board has scheduled a special meeting for next month to consider the financial report of Soft Farm and Agro-Allied Limited for the year ended December 31, 2022, and to review past financial reports and tax assessments. As the newly engaged Tax Consultant to the company, you have been invited to participate in the meeting to provide a professional opinion on tax-related issues.

The Financial Accountant has been directed by the Managing Director to provide you with financial statements for all periods under review, books of accounts, returns filed with tax authorities, and other supporting documents.

From your preliminary review of the financial report for the year ended December 31, 2022, you noted an item that requires further discussion with management. This issue relates to interest paid on a loan obtained from the parent company.

Extract from Financial Statements for the Year Ended December 31, 2022

Item N’000
Gross turnover:
– Domestic sales 147,500
– Export sales 200,100
– Other operating income 3,300
Total Gross Turnover 350,900
Deduct:
– Staff salary 122,600
– Ground rent paid to State government 3,200
– Motor running expenses 1,750
– Audit and accountancy fees 1,000
– Repairs and maintenance 5,800
– Depreciation of assets 38,240
– Rent paid 1,850
– Power and lighting 5,400
– Legal cost 5,000
– Rates (water) 2,100
– Allowance for doubtful debts 10,500
– Donations 4,000
– Interest and other finance costs paid 15,600
– Income tax provision 23,400
– General expenses 5,900
Total Deductions 246,340
Net Profit 104,560

Additional Information:

  1. Export Sales:
    20% of export sales were made to the parent company at the prevailing international market price.
  2. Other Operating Income:
    Description N’000
    Dividend received (net) 2,700
    Profit from disposal of non-current asset 600
    Total 3,300
  3. Repairs and Maintenance:
    Description N’000
    Repairs of plantation equipment 1,200
    Repairs to premises (non-industrial building) 900
    Expansion to warehouse (industrial building) 3,700
    Total 5,800
  4. Rent Paid:
    This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
  5. Legal Cost:
    Description N’000
    Cost of income tax appeal 850
    Cost of debt collection 1,300
    Cost of acquiring new lease 1,700
    Renewal of old lease 1,150
    Total 5,000
  6. Allowance for Doubtful Debts:
    Description N’000
    Specific provisions 5,230
    General provisions 7,870
    Bad debts recovered (2,600)
    Total 10,500
  7. Donations:
    Recipient N’000
    Palm Oil Research Institute 1,400
    National Library 600
    Cocoa Research Institute of Nigeria 1,000
    Women Society of the host community 1,000
    Total 4,000
  8. Interest and Other Finance Costs Paid:
    In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
  9. General Expenses:
    Description N’000
    Wedding gift to staff 350
    Fine imposed on company driver for traffic offense 150
    Haulage expenses 3,200
    Transport and travelling 2,200
    Total 5,900
  10. Schedule of Prior Years’ Turnover and Assessable Profits:
    Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)
    2018 154,400 78,750
    2019 198,600 95,120
    2020 310,300 142,800
    2021 314,900 166,900
  11. Schedule of Qualifying Capital Expenditure Incurred:
    Date of Acquisition Asset Type Amount (N’000)
    August 31, 2017 Plantation equipment 4,600
    August 31, 2017 Industrial building 12,000
    August 31, 2017 Non-industrial building 9,000
    January 1, 2018 Motor vehicles (3) 8,400
    January 1, 2018 Furniture and fittings (10) 1,500
    February 14, 2021 Motor vehicles (2) 5,600
    June 12, 2022 Furniture and fittings (10) 2,000
    July 8, 2022 Research and development 7,000

Required:

As the Tax Consultant to the company, draft a report to the Managing Director of Soft Farm and Agro-Allied Limited, in line with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended). The report should provide professional advice on the following:

  1. Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
  2. Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
  3. Tax Liabilities for All Relevant Assessment Years (17 Marks)

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  • 20 Marks

ATAX – Nov 2018 – L3 – Q2 – Taxation of Specialized Businesses

Calculation of petroleum profits tax for Olu Oil Limited considering local and export crude oil sales, gas contracts, and various expenses.

Olu Oil Limited has been in the oil prospecting business in one of the major oil fields in the Niger Delta region of Nigeria since 2009. The company has provided the following operational results for the year ended December 31, 2015:

(i) Type of crude oil and sales statistics:

  • Bonny Light: 35,000 barrels exported at 39º API
  • Bonny Medium: 25,200 barrels exported at 35º API
  • Forcados: 16,300 barrels exported at 32º API

Price per barrel:

  • Bonny Light: $52.03 at 35º API
  • Bonny Medium: $49.04 at 35º API
  • Forcados: $48.29 at 35º API

Adjustment for API variance: Actual realized price was arrived at after adjusting for the variance in API. Thus, for every API, $0.03 was the variance in price at 35º API.

(ii) Local sales of crude oil: 32,750 barrels of crude oil was produced and sold in the domestic market at the rate of N345 per barrel.

(iii) Natural gas sales from two contracts:

Contract Value (N) Load Factor
Obi Ltd 42,285,000 62
Oba Ltd 27,775,000 74

(iv) Miscellaneous income: N125,800,300, including N105,500,000 from the sale of refined petroleum products. Attributable expenses of N88,240,000 were included in management and administrative expenses.

(vi) Miscellaneous income included N105,500,000, from the sale of refined petroleum products. An equivalent attributable expenses of N88,240,000 was included in management and administrative expenses.
(vii) Interest paid included N5,350,000, which was paid to Prince Limited, an associated company.
(viii) Donations included:

(ix) The pension scheme was approved by the Joint Tax Board.

(x) Exchange loss on remittance amounting to N3,200,000 was included in management and administrative expenses.
(xi) The schedule of qualifying capital expenditure includes:

(xii) Capital allowances brought forward was N12,700,000.
(xiii) The rate of exchange was N360 to a US Dollar.
(xiv) NNPC provides the relevant schedule as follows:

Required:
Evaluate the transactions and advise the management on:
(a.) Assessable profit (14 Marks)
(b.) Chargeable profit (2 Marks)
(c.) Chargeable tax (2 Marks)
(d.) Total tax liability payable (2 Marks)

 

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  • 21 Marks

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

Greater Tomorrow Foundation (GTF) was established with the aim of providing support to children from disadvantaged backgrounds who wish to participate in sports, such as tennis, athletics, and football. It has benefited the country, with some beneficiaries representing the nation in international competitions.

GTF has a constitution detailing how income can be spent and limits administrative expenditure to one-eighth of its income annually.

GTF’s income comes solely from voluntary donations, including:

  • Cash collected by volunteers from the public.
  • Direct donations from generous individuals.

Certain donations specify that the principal amount cannot be spent, with income generated (interest) allocated to specific activities, like providing sports equipment (e.g., footballs, boots, rackets, sportswear, etc.).

Required:

a. Explain FIVE areas of inherent risk in Greater Tomorrow Foundation (GTF) and explain the effect of each risk on the audit approach. (10 Marks)

b. Explain FIVE reasons why the control environment may be weak in GTF. (10 Marks)

 

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  • 15 Marks

AA – Nov 2016 – L2 – Q7 – Audit of Public Sector Entities

This question focuses on audit areas to consider for not-for-profit organisations and other factors peculiar to their audits.

Savealife Nigeria is the local member of Savealife International, a Non-governmental Donor Agency.

Required:

a) Summarise the main audit areas to consider in relation to the audit of Savealife Nigeria.
(10 Marks)

b) Highlight other factors peculiar to such not-for-profit organisations that the Auditor needs to consider.
(5 Marks)

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  • 8 Marks

TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

Under the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended), for an expenditure to be allowable for tax purposes, it should be an expenditure incurred wholly, exclusively, necessarily, and reasonably in earning the income of the company. Despite the above-stated assertion, some donations are still allowable for tax purposes.

Required:
State the conditions that must be met before a donation is allowed for tax purposes.

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  • 1 Marks

QTB – Nov 2015 – L1 – SA – Q16 – Mathematics

This question calculates the number of donations made in an arithmetic progression.

A woman made weekly donations according to an Arithmetic Progression (AP). How many donations did she make if her first donation was N5,000, her second donation was N6,000, and her last donation was N49,000?

A. 44
B. 45
C. 46
D. 47
E. 48

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  • 10 Marks

PT – Nov 2023 – L2 – Q4a – Income Tax Liabilities

Explanation of tax treatment of research and development expenses, contributions to worthwhile causes, and financial costs from derivatives.

Your company has recruited five new employees, and the Director of Training has instructed you to explain certain provisions in the Income Tax Act, 2015 (Act 896) to them:

i) Research and development expenditure (3 marks)
ii) Contribution and donations to worthwhile causes (3 marks)
iii) Financial cost from derivatives (4 marks)

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  • 10 Marks

AT – Nov 2020 – L3 – Q5a – Tax planning

A draft paper outlining the types of worthwhile causes and donations available, circumstances for accessing them, and their benefits for Gona Jon Ltd.

You have been engaged by Kaek Consult, a tax consulting firm as an intern to be confirmed when you complete the final level of the ICAG examinations.

Your first assignment is to draft a paper to Gona Jon Ltd, who intends to take advantage of contributions and donations to a worthwhile cause. Your write-up should classify the types of worthwhile causes and donations available, the circumstances under which they can be accessed, and their benefits.

Required:
Write a draft paper for your manager’s consideration, which will be reviewed and finalized for Gona Jon Ltd on the worthwhile causes, benefits, and how to access them.

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  • 15 Marks

ATAX – May 2016 – L3 – Q5 – Taxation of Companies

Compute the original and revised tax liabilities of Atlas Nigeria Limited, considering tax official adjustments.

Atlas Nigeria Limited is into the sale of Mobile Phones, and the company’s year-end is December 31 of each year. The company’s Annual Tax Returns for the year ended December 31, 2012, were submitted in January 2014. Tax officials found a number of irregularities during a routine examination of the Tax Returns. They discovered that trade payables included N940,000 representing VAT for the two months to December 31, 2012. All sales attract VAT. There was no Input VAT during 2012. Tax officials were, however, of the opinion that the income of the company accrued uniformly throughout the 12 months of the year.

The accounts showed Adjusted Profits of N44,062,500, and Capital Allowances totaled N33,025,000. The tax liability arrived at was N4,406,250. The tax officials were not satisfied with the explanations received in connection with the Withholding Tax on the Director’s fee of N1,562,500, as well as Consultancy fee of N812,500. They also decided to write back 2/3 of the following expenses:

  • Printing and Stationery N168,750
  • Donations and Subscription N1,320,620
  • Losses claimed, amounting to N128,025 was disallowed. Included in the adjusted profit figure is N6,962,500 for Depreciation.

REQUIRED:

i. Show the computations resulting in the Original Tax Liability of N4,406,250 (5 marks)

ii. Compute a revised Tax liability based on the findings of the Tax Officials (10 marks)

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  • 30 Marks

ATAX – May 2022 – L3 – Q1 – Taxation of Companies

Determination of tax liabilities, treatment of donations, and exemptions of dividends based on CIT Act provisions.

Dadinkowa Nigeria Limited has been in business since 2009 as a manufacturer of sugar cubes. The company sources its raw materials, sugar cane, from the Northern part of the country. However, due to local security challenges, the company has faced supply disruptions since 2016.

Additionally, the company has disagreements with tax authorities regarding the treatment of certain items (e.g., donations and dividend income) in their financial statements and returns. High overhead costs, especially energy expenses, have worsened operational challenges.

At a recent board meeting, the directors proposed either a temporary closure or relocating to a neighboring country if conditions do not improve in the next fiscal year. The General Manager shared this with you during your visit as the company’s tax consultant, seeking your advice to address these issues.

A scheduled meeting with the Managing Director requires you to prepare a comprehensive tax report addressing:

  1. Determination of the company’s tax liabilities for the relevant tax year.
  2. Analysis of the treatment of donations and exemptions of dividend income under the Companies Income Tax Act (CITA).

The profit or loss account for the year ended December 31, 2021, is as follows:

Profit or Loss Account:

Extract from the company’s statement of financial position as at December 31, 2021 revealed:

The following additional information was made available:

(v) Interest on loan was paid on a facility obtained from a licensed Nigerian deposit money bank at commercial interest rate.
(vi) General and administrative expenses were made up of:

(vii) Donations and subscriptions
Included in donations was N12,000,000 paid to a fund created by the Federal Government for victims of communal crisis that took place where the company is situated.
(viii) The tax written down values of the qualifying capital expenditure (QCE) items as at December 31, 2020 were:

(ix) Additions to QCEs during the year ended December 31, 2021 were:

(x) Unrelieved capital allowances brought forward were N15,200,000.
(xi) Unabsorbed losses from previous years were:

Required:

As the company’s Tax Consultant, you are to draft a report to the Managing Director for the scheduled meeting expected to hold next week. This is expected to address the following:
a. Determination of the company’s tax liabilities for the relevant tax year. (20 Marks)
b. Comment, in line with the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended) on:
i. The treatment of donations made by the company during the year under review (5 Marks)
ii. Exemption of dividends from taxation (5 Marks)

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  • 30 Marks

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Soft Farm and Agro-Allied Limited, a subsidiary of Emperor Agro Incorporated, Italy, was incorporated in Nigeria in January 2018. Soft Farm and Agro-Allied Limited produces palm kernel for domestic use and export to the European market. The Managing Director of the company has just received a letter from the head office (parent company) about an impending visit due to poor business performance (below the group’s return on investment benchmark of 25%) since the business commenced, despite financial and technical support from the parent company.

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

The Board has scheduled a special meeting for next month to consider the financial report of Soft Farm and Agro-Allied Limited for the year ended December 31, 2022, and to review past financial reports and tax assessments. As the newly engaged Tax Consultant to the company, you have been invited to participate in the meeting to provide a professional opinion on tax-related issues.

The Financial Accountant has been directed by the Managing Director to provide you with financial statements for all periods under review, books of accounts, returns filed with tax authorities, and other supporting documents.

From your preliminary review of the financial report for the year ended December 31, 2022, you noted an item that requires further discussion with management. This issue relates to interest paid on a loan obtained from the parent company.

Extract from Financial Statements for the Year Ended December 31, 2022

Item N’000
Gross turnover:
– Domestic sales 147,500
– Export sales 200,100
– Other operating income 3,300
Total Gross Turnover 350,900
Deduct:
– Staff salary 122,600
– Ground rent paid to State government 3,200
– Motor running expenses 1,750
– Audit and accountancy fees 1,000
– Repairs and maintenance 5,800
– Depreciation of assets 38,240
– Rent paid 1,850
– Power and lighting 5,400
– Legal cost 5,000
– Rates (water) 2,100
– Allowance for doubtful debts 10,500
– Donations 4,000
– Interest and other finance costs paid 15,600
– Income tax provision 23,400
– General expenses 5,900
Total Deductions 246,340
Net Profit 104,560

Additional Information:

  1. Export Sales:
    20% of export sales were made to the parent company at the prevailing international market price.
  2. Other Operating Income:
    Description N’000
    Dividend received (net) 2,700
    Profit from disposal of non-current asset 600
    Total 3,300
  3. Repairs and Maintenance:
    Description N’000
    Repairs of plantation equipment 1,200
    Repairs to premises (non-industrial building) 900
    Expansion to warehouse (industrial building) 3,700
    Total 5,800
  4. Rent Paid:
    This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
  5. Legal Cost:
    Description N’000
    Cost of income tax appeal 850
    Cost of debt collection 1,300
    Cost of acquiring new lease 1,700
    Renewal of old lease 1,150
    Total 5,000
  6. Allowance for Doubtful Debts:
    Description N’000
    Specific provisions 5,230
    General provisions 7,870
    Bad debts recovered (2,600)
    Total 10,500
  7. Donations:
    Recipient N’000
    Palm Oil Research Institute 1,400
    National Library 600
    Cocoa Research Institute of Nigeria 1,000
    Women Society of the host community 1,000
    Total 4,000
  8. Interest and Other Finance Costs Paid:
    In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
  9. General Expenses:
    Description N’000
    Wedding gift to staff 350
    Fine imposed on company driver for traffic offense 150
    Haulage expenses 3,200
    Transport and travelling 2,200
    Total 5,900
  10. Schedule of Prior Years’ Turnover and Assessable Profits:
    Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)
    2018 154,400 78,750
    2019 198,600 95,120
    2020 310,300 142,800
    2021 314,900 166,900
  11. Schedule of Qualifying Capital Expenditure Incurred:
    Date of Acquisition Asset Type Amount (N’000)
    August 31, 2017 Plantation equipment 4,600
    August 31, 2017 Industrial building 12,000
    August 31, 2017 Non-industrial building 9,000
    January 1, 2018 Motor vehicles (3) 8,400
    January 1, 2018 Furniture and fittings (10) 1,500
    February 14, 2021 Motor vehicles (2) 5,600
    June 12, 2022 Furniture and fittings (10) 2,000
    July 8, 2022 Research and development 7,000

Required:

As the Tax Consultant to the company, draft a report to the Managing Director of Soft Farm and Agro-Allied Limited, in line with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended). The report should provide professional advice on the following:

  1. Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
  2. Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
  3. Tax Liabilities for All Relevant Assessment Years (17 Marks)

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  • 20 Marks

ATAX – Nov 2018 – L3 – Q2 – Taxation of Specialized Businesses

Calculation of petroleum profits tax for Olu Oil Limited considering local and export crude oil sales, gas contracts, and various expenses.

Olu Oil Limited has been in the oil prospecting business in one of the major oil fields in the Niger Delta region of Nigeria since 2009. The company has provided the following operational results for the year ended December 31, 2015:

(i) Type of crude oil and sales statistics:

  • Bonny Light: 35,000 barrels exported at 39º API
  • Bonny Medium: 25,200 barrels exported at 35º API
  • Forcados: 16,300 barrels exported at 32º API

Price per barrel:

  • Bonny Light: $52.03 at 35º API
  • Bonny Medium: $49.04 at 35º API
  • Forcados: $48.29 at 35º API

Adjustment for API variance: Actual realized price was arrived at after adjusting for the variance in API. Thus, for every API, $0.03 was the variance in price at 35º API.

(ii) Local sales of crude oil: 32,750 barrels of crude oil was produced and sold in the domestic market at the rate of N345 per barrel.

(iii) Natural gas sales from two contracts:

Contract Value (N) Load Factor
Obi Ltd 42,285,000 62
Oba Ltd 27,775,000 74

(iv) Miscellaneous income: N125,800,300, including N105,500,000 from the sale of refined petroleum products. Attributable expenses of N88,240,000 were included in management and administrative expenses.

(vi) Miscellaneous income included N105,500,000, from the sale of refined petroleum products. An equivalent attributable expenses of N88,240,000 was included in management and administrative expenses.
(vii) Interest paid included N5,350,000, which was paid to Prince Limited, an associated company.
(viii) Donations included:

(ix) The pension scheme was approved by the Joint Tax Board.

(x) Exchange loss on remittance amounting to N3,200,000 was included in management and administrative expenses.
(xi) The schedule of qualifying capital expenditure includes:

(xii) Capital allowances brought forward was N12,700,000.
(xiii) The rate of exchange was N360 to a US Dollar.
(xiv) NNPC provides the relevant schedule as follows:

Required:
Evaluate the transactions and advise the management on:
(a.) Assessable profit (14 Marks)
(b.) Chargeable profit (2 Marks)
(c.) Chargeable tax (2 Marks)
(d.) Total tax liability payable (2 Marks)

 

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  • 21 Marks

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

Greater Tomorrow Foundation (GTF) was established with the aim of providing support to children from disadvantaged backgrounds who wish to participate in sports, such as tennis, athletics, and football. It has benefited the country, with some beneficiaries representing the nation in international competitions.

GTF has a constitution detailing how income can be spent and limits administrative expenditure to one-eighth of its income annually.

GTF’s income comes solely from voluntary donations, including:

  • Cash collected by volunteers from the public.
  • Direct donations from generous individuals.

Certain donations specify that the principal amount cannot be spent, with income generated (interest) allocated to specific activities, like providing sports equipment (e.g., footballs, boots, rackets, sportswear, etc.).

Required:

a. Explain FIVE areas of inherent risk in Greater Tomorrow Foundation (GTF) and explain the effect of each risk on the audit approach. (10 Marks)

b. Explain FIVE reasons why the control environment may be weak in GTF. (10 Marks)

 

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  • 15 Marks

AA – Nov 2016 – L2 – Q7 – Audit of Public Sector Entities

This question focuses on audit areas to consider for not-for-profit organisations and other factors peculiar to their audits.

Savealife Nigeria is the local member of Savealife International, a Non-governmental Donor Agency.

Required:

a) Summarise the main audit areas to consider in relation to the audit of Savealife Nigeria.
(10 Marks)

b) Highlight other factors peculiar to such not-for-profit organisations that the Auditor needs to consider.
(5 Marks)

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  • 8 Marks

TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

Under the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended), for an expenditure to be allowable for tax purposes, it should be an expenditure incurred wholly, exclusively, necessarily, and reasonably in earning the income of the company. Despite the above-stated assertion, some donations are still allowable for tax purposes.

Required:
State the conditions that must be met before a donation is allowed for tax purposes.

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  • 1 Marks

QTB – Nov 2015 – L1 – SA – Q16 – Mathematics

This question calculates the number of donations made in an arithmetic progression.

A woman made weekly donations according to an Arithmetic Progression (AP). How many donations did she make if her first donation was N5,000, her second donation was N6,000, and her last donation was N49,000?

A. 44
B. 45
C. 46
D. 47
E. 48

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  • 10 Marks

PT – Nov 2023 – L2 – Q4a – Income Tax Liabilities

Explanation of tax treatment of research and development expenses, contributions to worthwhile causes, and financial costs from derivatives.

Your company has recruited five new employees, and the Director of Training has instructed you to explain certain provisions in the Income Tax Act, 2015 (Act 896) to them:

i) Research and development expenditure (3 marks)
ii) Contribution and donations to worthwhile causes (3 marks)
iii) Financial cost from derivatives (4 marks)

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  • 10 Marks

AT – Nov 2020 – L3 – Q5a – Tax planning

A draft paper outlining the types of worthwhile causes and donations available, circumstances for accessing them, and their benefits for Gona Jon Ltd.

You have been engaged by Kaek Consult, a tax consulting firm as an intern to be confirmed when you complete the final level of the ICAG examinations.

Your first assignment is to draft a paper to Gona Jon Ltd, who intends to take advantage of contributions and donations to a worthwhile cause. Your write-up should classify the types of worthwhile causes and donations available, the circumstances under which they can be accessed, and their benefits.

Required:
Write a draft paper for your manager’s consideration, which will be reviewed and finalized for Gona Jon Ltd on the worthwhile causes, benefits, and how to access them.

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