Series: MAY 2023

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  • 15 Marks

TAX – May 2023 – L2 – SC – Q7 – Tax Incentives and Reliefs

Explain tax incentives and penalties for enterprises in export processing zones.

The Federal Government in a bid to further boost the growth in foreign exchange earnings, create new jobs, facilitate economic diversification, industrialization, and provide access to foreign technology, came up with its export processing zones (EPZs) policy.

EPZ is regarded as a customs area where an enterprise is allowed to import plant, machinery, equipment, and raw materials, process them, and then export them to the world market, under security and without paying duty.

To facilitate a better understanding of the above assertions, the Managing Director of a would-be client approached you for explanations of the relevant provisions of the Nigerian Export Processing Zones Act Cap. N107 LFN 2004 (as amended) and Companies Income Tax Act Cap. C21 LFN 2004 (as amended).

Required:

a. Discuss SIX special tax incentives for enterprises operating in an export processing zone. (12 Marks)

b. Explain the penalties for non-compliance with section 55(1) of CITA (as amended). (3 Marks)

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  • 15 Marks

TAX – May 2023 – L2 – SC – Q6 – Value-Added Tax (VAT)

Compute VAT remittance for Fountain Hotels' July 2022 transactions and explain VAT concepts.

Fountain Hotels Limited is a group of hotels located in many parts of North Central Nigeria, providing accommodation and other hospitality services. It renders its returns at the end of each month in accordance with the Value Added Tax Act 2004 (as amended).

The following are the details of the transactions for the month of July 2022:

  • VAT on outdoor catering services: N600,000
  • VAT on food: N360,000
  • VAT on drinks: N240,000
  • VAT on other vatable hotel services: N270,000
  • VAT on drinks purchased: N150,000
  • VAT on foodstuff purchased: N210,000
  • VAT on kitchen equipment: N480,000
  • VAT on professional services: N240,000

Additional Information:

  1. 30% of outdoor catering services were on credit.
  2. 20% of food and drinks were on credit.
  3. Other vatable hotel services were paid in full.
  4. 25% of VAT on drinks and foodstuff purchased were on credit.
  5. VAT on kitchen equipment and professional services were paid in full.

Required:

a. Compute the VAT remittable to the Federal Inland Revenue Service in respect of July 2022 transactions. (9 Marks)

b. Write short notes on the following:
i. Revenue VAT (2 Marks)
ii. Zero-rated supplies and services (2 Marks)
iii. VAT on exports (2 Marks)

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  • 15 Marks

TAX – May 2023 – L2 – SC – Q5 – Taxation of Specialized Businesses

Explain solutions to multiple taxation and list causes.

Multiple taxation is a tax regime under which various and similar taxes are imposed on taxpayers by different tiers of government. This has become a national problem discouraging taxpayers from performing their civic responsibilities. The 1999 Constitution of the Federal Republic of Nigeria seeks to eliminate multiple taxation at all levels of government as provided for in Part II, Paragraphs 7 to 10.

Required:

a. Explain FOUR Constitutional and other possible solutions provided on how to eliminate multiple taxes. (10 Marks)

b. State FIVE possible causes of multiple taxation. (5 Marks)

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  • 20 Marks

TAX – May 2023 – L2 – SA – Q4 – Companies Income Tax

Calculate assessable profit basis periods and capital allowances for Wizzy-Baddo Ltd.

As part of the induction program for the newly recruited staff of your firm of tax consultants, you have been tasked with a presentation on companies’ income tax computation for beginners during the firm’s training session.

You are provided with the following information relating to Wizzy-Baddo Limited, which commenced business on September 1, 2020:

  • Adjusted Profit:
    • Period to December 31, 2020: N6,937,500
    • Year ended December 31, 2021: N9,300,500

The following assets were acquired as follows:

Date Asset Cost (N)
June 5, 2020 Land and building 5,467,500
July 1, 2020 Motor vehicle 10,000,000
October 15, 2020 Machinery 4,375,000
February 28, 2021 Furniture 3,458,000
May 1, 2021 Delivery van 4,750,000

Required:

a. State the basis periods for assessable profits and qualifying capital expenditure. (5 Marks)

b. Compute the capital allowances.

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  • 20 Marks

TAX – May 2023 – L2 – SA – Q3 – Tax Dispute Resolution

Explain conditions for final assessment and discuss objection and appeal procedures for tax assessments.

Taxation has been defined as the imposition of compulsory levies on individuals and entities by governments in most countries in the world. The primary objective of taxation is essentially to generate revenue or raise money for government expenditure on social welfare.

You were appointed as the accountant of Specks Nigeria Limited on August 31, 2022. Based on self-assessment, the company filed the audited financial statements for the year ended December 31, 2021, together with its tax computations on June 7, 2022, and the relevant tax liabilities were fully paid on the same date.

On August 31, 2022, the Federal Inland Revenue Service raised an assessment that was not in line with the tax returns. At the meeting of the directors held in September 2022, this issue was discussed, and you were mandated to quickly address it so that the assessment would not become final and conclusive.

Required:
a. When will an assessment become final and conclusive? (5 Marks)
b. Discuss the following in relation to objection and appeal procedures:
(i) Time limit for objection and appeal (4 Marks)
(ii) Contents of a notice of objection (4 Marks)
(iii) Amendment of assessment and notice of refusal to amend (NORA) (7 Marks)

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  • 20 Marks

TAX – May 2023 – L2 – SA – Q2 – Personal Income Tax (PIT)

Differentiate employment contract types and explain tax residency rules for individuals.

The Personal Income Tax Act Cap.P8 LFN, 2004 (as amended) defines “employment,” whilst the Labour Act Cap.L1 LFN, 2004 (as amended), defines “contract of employment.”

An individual’s liability to income tax is often determined by their residence status within a state during a particular assessment year. A taxpayer is liable to the tax authority in the territory where they are deemed resident for that assessment year.

Required:
a. Differentiate between “contract of employment” and “contract for employment.” (8 Marks)
b. Explain the rules guiding the determination of residence for SIX categories of individuals for tax purposes. (12 Marks)

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  • 30 Marks

TAX – May 2023 – L2 – SA – Q1 – Personal Income Tax (PIT)

Compute partnership income and individual partner tax liabilities.

Fadeke, Femi, Kola, and Gbenga have been in partnership as medical practitioners for eight years. The statement of profit or loss for the year ended December 31, 2021, is as follows:

  1. Capital allowances agreed with the revenue: N980,000
  2. Profits are to be shared equally among the partners.
  3. Fadeke and Femi are married with three and two children, respectively.
  4. Fadeke has a life assurance policy of N960,000 on which she pays N96,000 annually as a premium.
  5. Fadeke maintains her aged father who is over 68 years.

Required:

a. Compute the income of the partnership. (5 Marks)
b. Compute the income tax liability of each of the partners. (25 Marks)
(Total: 30 Marks)

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  • 15 Marks

CSME – May 2023 – L1 – SB – Q7 – Risk Management and Corporate Strategy

Analysis of enterprise and operational risks for Gbam Telecoms in launching 5G services.

Gbam Telecoms Plc, a leading mobile phone and internet communications company, is planning to roll out its 5th Generation (5G) spectrum. As a new product, the 5G spectrum promises customers high-speed internet with immense possibilities in computing, big data management, robotics, and other numerous benefits. While a section of the populace believes that the roll-out is a welcome development, others express reservations about the 5G technology. Within Gbam Telecoms Plc, some employees believe that the erratic nature of the country’s power supply could damage the 5G transponders. Also, the high cost of diesel would increase the company’s operating costs, thus making the product largely unaffordable to prospective consumers. There are also security threats to the company’s facilities due to heightened insecurity in the country. The umbrella trade union for the company’s employees is also agitating for a pay rise and hazard allowance should the company go ahead with the 5G roll-out. Some experts believe that the market for 5G spectrum in the country today is negligible because most telecommunication and internet devices used by consumers in the market are not 5G-compliant. There are also reports that the competitors of Gbam Telecoms Plc are studying how the market will respond to Gbam Telecoms’ 5G spectrum before deciding to enter the market. In addition, a study carried out in Europe concluded that 5G spectrum may be hazardous to the health of people living close to 5G transponders. There is also news about the development of new and better technologies called 6G and 7G, which may make 5G obsolete within a short period of time.

Required:

  1. (a) Advise the management of Gbam Telecoms Plc on the enterprise and operational risks that could be associated with the roll-out of 5G spectrum using information contained in the given scenario. (11 Marks)
  2. (b) Suggest to Gbam Telecoms Plc the key elements that should be contained in the company’s Risk Management System. (4 Marks)

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  • 15 Marks

CSME – May 2023 – L1 – SB – Q6 – Ethics in Business

Application of Kohlberg's moral development stages in ethical decisions and critiques of the theory.

Using Kohlberg’s stages of moral development, identify and explain the reasons why individuals make their decisions when faced with moral dilemmas.

(a) Identify and explain the reasons why individuals make their decisions when faced with a moral dilemma using Kohlberg’s stages of moral development. (12 Marks)

(b) Explain the criticisms of Kohlberg’s stages of moral development. (3 Marks)

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  • 15 Marks

CSME – May 2023 – L1 – SB – Q5 – Ethics in Business

Differences between creative and critical thinking and their impact on employer benefits.

Creative and critical thinking are essential skills that chartered accountants should possess for optimal performance.

(a) Differentiate between creative and critical thinking. (4 Marks)

(b) Explain the modes through which creative thinking is expressed. (8 Marks)

(c) Explain how the creative thinking of employees benefits their employers. (3 Marks)

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  • 20 Marks

CSME – May 2023 – L1 – SA – Q4 – Ethics in Business

Exploration of ethical stances and CSR implications for business startups with social goals.

Richard and his wife, Rachael, have just retired as top-level managers from one of the biggest oil companies in the country. They have earned substantial personal wealth and have ample investments in several blue-chip companies. Rachael, a food technologist passionate about healthy living, convinced Richard to start a company to produce organic drinks and foods from only natural ingredients. She also suggested that the company adopt environmentally friendly manufacturing processes and consider the wellbeing of all employees and other stakeholders.

The primary reason for establishing the company is to fulfill a passion, build a sustainable, socially impactful business, and not aggressively pursue profit. Hence, both Richard and Rachael are happy to just break even initially and later record minimal profits.

As an expert in business ethics, you are required to:

(a) Identify the alternative ethical stances available to Richard and Rachael and the ones implied in the scenario. (4 Marks)

(b) Discuss Gray, Owen, and Adams’s classification of groups of people and their views of the relationship between business organizations and society. (14 Marks)

(c) Which of the classifications in (b) above is relevant to Richard and Rachael? (2 Marks)

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  • 20 Marks

CSME – May 2023 – L1 – SA – Q3 – Corporate Governance

Explanation of corporate governance statement contents and voluntary disclosure.

The code of corporate governance prescribes corporate governance disclosures for listed companies.

(a) Explain the contents of a corporate governance statement. (12 Marks)

(b) Not all information that corporate entities can provide is mandatory. Explain the justifications and drawbacks of voluntary disclosure in corporate governance reports. (8 Marks)

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  • 20 Marks

CSME – May 2023 – L1 – SA – Q2 – Risk Management and Corporate Strategy

Exploring risk management through identification, ranking, and stakeholder impacts.

Every business venture has some measure of risk exposure that must be identified, measured, and adequately prepared for. Indeed, each business entity should have in place a good risk management strategy.

As a risk manager, clarify the following in ways that will be comprehensible to a greenhorn in business:

(a) Risk identification. (5 Marks)

(b) Importance of ranking risks. (3 Marks)

(c) Examine the impact of risks on categories of stakeholders. (12 Marks)

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  • 30 Marks

CSME – May 2023 – L1 – SA – Q1 – Strategic Implementation

Strategies for market expansion, sustainable advantage, and industry environment for a medium-scale food processing firm.

Oyinbo Industries Limited is a medium-scale enterprise involved in the processing and packaging of local (traditional) food items for the Nigerian market. Its product portfolio includes Instant Elubo Powder, Instant Pounded Yam Powder, and Instant Beans Powder, all of which have been successful in the Nigerian market. The company hopes to expand its market coverage to the United States, United Kingdom, France, Canada, and the United Arab Emirates, which are believed to be viable new markets for the products.

To achieve these goals, the company plans to strengthen its position in the Nigerian market, focusing on increasing market share, sales growth, and profitability. Recently, it expanded its product range by introducing Instant Plantain Powder, Instant Soya Beans Powder, and Garri Ijebu. The table below shows current market and sales growth for each product:

*Products introduced into the market in 2021

The company’s current market growth rate for each product is over 10%, largely due to population growth and concerns about food hygiene in open markets. Oyinbo Industries seeks to leverage this opportunity to become a leader in processed and packaged foods in Nigeria.

However, competitors are mainly cottage industries and small-scale producers who, despite limited resources, control substantial market share. These firms primarily depend on small rural farmers for raw materials, which are abundant but lack regulation.

As part of its growth plan, Oyinbo Industries intends to secure a raw material supply by acquiring farmland in Kwara State. It also aims to collaborate with a local fabricator for its processing equipment. In the next phase, the firm plans to leverage its distribution network and internal capabilities to expand market share in Nigeria and increase sales of new products. However, challenges such as frequent power outages and equipment breakdowns remain.

Required:

  1. (a) Advise on strategies for each product that align with the company’s strategic direction using Ansoff Growth Vector Analysis. (13 Marks)
  2. (b) Explain how to achieve sustainable competitive advantage using Michael Porter’s Six Principles. (6 Marks)
  3. (c) Describe key business environment elements using the PESTEL framework. (6 Marks)
  4. (d) Identify the type of integration strategy being pursued and discuss potential drawbacks. (5 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SC – Q7 – Government Revenue

Differentiates public revenue and receipts, oil and non-oil revenue, and discusses revenue allocation challenges in Nigeria.

Government, like any other economic unit, needs funds, which can be raised from various sources for the purpose of financing its activities.

Required:

a. Differentiate between:
i. Public revenue and public receipts, and state their sources. (3 Marks)
ii. Oil and non-oil revenue. (2 Marks)

b. Discuss FIVE problems associated with revenue allocation in Nigeria. (10 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SC – Q6 – Public Sector Reforms

Criteria for selecting loan sources, Paris Club debt rescheduling principles, and challenges in state government project financing.

Sometimes, countries contracting loan obligations are able to choose between different sources of credits, allowing them to base decisions on the most favorable conditions.

Required:

a. Identify and explain FOUR criteria for decision-making in choosing credit sources. (6 Marks)
b. Explain TWO main principles that guide the Paris Club debt rescheduling process. (4 Marks)
c. Discuss FIVE problems facing state governments in financing projects from capital markets. (5 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SA – Q5 – Fiscal Policy and Public Finance

Explains why government intervenes in the economy and identifies Nigeria's macroeconomic objectives.

A national economy requires the involvement of government to thrive, and its presence supports citizens’ livelihoods.

Required:

i. Identify and explain FIVE reasons why the government intervenes in the economy. (7.5 Marks)
ii. Identify and explain FIVE macroeconomic objectives in Nigeria. (7.5 Marks)

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  • 20 Marks

PSAF – May 2023 – L1 – SA – Q4 – Regulatory and Institutional Framework

Discusses the requirements for MTEF preparation and submission and identifies documents accompanying the Nigerian budget.

a. In the course of writing Medium-Term Expenditure Framework (MTEF) report, several issues relating to states in the Federation were integrated into the report in line with the Fiscal Responsibility Act (2010).

Required:

i. Explain the TWO requirements of the Fiscal Responsibility Act as it affects time lag for the preparation of MTEF and submission to the National Assembly. (3 Marks)

ii. Identify FIVE documents that should accompany the estimates of revenue and expenditure of Nigeria’s annual budget to the National Assembly (NASS). (5 Marks)

b. Upon assuming office, the head of Bureau of Establishments and Training of Takuro State organized a training workshop for government officials across all Ministries, Departments, and Agencies (MDAs) in the state to emphasize the importance of public sector accounting for efficient job performance.

Required:

i. Identify and explain FOUR objectives of public sector accounting that you will discuss at the workshop. (6 Marks)

ii. Identify SIX external users of public sector accounting reports, highlighting their information needs. (6 Marks)

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  • 20 Marks

PSAF – May 2023 – L1 – SA – Q3 – Pension Accounting in the Public Sector

Outline PTAD's functions and National Pension Commission's powers over PTAD as per the PRA 2014.

a. Sections 42 and 44 of Pension Reform Act (PRA) 2014 established Pension Transitional Arrangements Directorate (PTAD) for public service of the Federation and Pension Transitional Arrangements Directorate (PTAD) for the Federal Capital Territory (FCT) respectively.

Required:

i. Identify SEVEN functions of the PTAD as contained in PRA (2014). (7 Marks)
ii. Identify THREE powers which National Pension Commission has over Pension Transitional Arrangements Directorate for public service of the Federation and Federal Capital Territory. (3 Marks)

b. Two accountants in the Ministry of Finance of Welfare State were in a debate as to which basis of accounting for revenue and expenditure should be adopted in the state. Five bases of accounting for the finance of the state were put forward: accrual basis, cash basis, modified cash basis, modified accrual basis, and commitment basis.

Required:

As a student of public sector accounting, explain any FOUR bases under the following headings:

i. Concepts of the FOUR bases.
ii. THREE merits of cash basis.
iii. THREE merits of accrual basis. (10 Marks)

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  • 20 Marks

PSAF – May 2023 – L1 – SA – Q2 – Regulatory and Institutional Framework

Objectives and contents of Local Government Financial Memoranda and journal entries for Bureau transactions.

a. The revised Local Government Financial Memoranda (1991) spells out the administrative guidelines, the existing checks and balances, and roles of officers in local governments.

Required:

Identify THREE objectives and FIVE contents of Local Government Financial Memoranda. (8 Marks)

b. Bureau of Establishments and Training of Waso State awarded a contract to one of its Government Business Entities (GBE), Unity Enterprises, for the supply of stationery for use in various MDAs in the State. The Bureau conducted the following transactions for the year ended December 31, 2020:

  1. The Bureau issued a purchase order to Unity Enterprises for the supply of 1,250,000 reams of duplicating papers at N1,200 per unit. The items were supplied on May 31, 2020.
  2. An additional order for 5,000 training bags was placed with Unity Enterprises at N2,500 per bag. The bags were delivered on June 30, 2020.
  3. During the year, 1,100,000 reams of duplicating papers and 4,500 training bags were issued to user departments for training activities.
  4. Physical verification revealed that 25,000 reams of duplicating papers were damaged by floodwater.
  5. The Bureau transferred 25,000 reams of duplicating papers to its outstation office.

Required:

Record the above transactions as journal entries in the books of Bureau of Establishments and Training of Waso State.

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