Chargeable Tax – NBC Institute

ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)

Compute assessable and chargeable profits, assessable and chargeable taxes, and tertiary education tax for Sky Petroleum Plc.

Question

Sky Petroleum Plc commenced operations over ten years ago and makes up accounts to December 31 annually. The following details have been extracted from the accounting records for the year ended December 31, 2014:

Details	Amount
Crude Oil Exported	3,500,000 barrels
Crude Oil Used Locally	1,200,000 barrels at ₦100 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
Allowance for Bad Debts – General	₦7,500,000
Allowance for Bad Debts – Specific	₦11,200,000
Depreciation	₦7,250,000
Losses Brought Forward	₦13,200,000

Qualifying Capital Expenditure:

Asset	Date Acquired	Location	Amount (₦)
Pipeline and Storage Tanks	March 2014	Continental Shelf (190m water depth)	₦48,000,000
Plant and Machinery	June 2012	Territorial Waters (90m water depth)	₦63,800,000
Furniture and Fittings	May 2011	Territorial Waters (95m water depth)	₦21,000,000
Building	April 2013	Onshore	₦71,000,000

Breakdown of Management and Administration Expenses:

Item	Amount (₦)
Donations to Political Parties	₦8,500,000
Expenditure for Petroleum Deposit Information	₦4,700,000
Companies Income Tax of an Associated Company	₦5,000,000
Interest on Inter-Company Loans (at 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
Rents Paid for Oil Prospecting License	₦3,600,000
Other Administrative Expenses	₦32,000,000
Total	₦240,500,000

Additional Information:

International market price of crude oil in 2014 was USD $75 per barrel.
Exchange rate: USD $1 = ₦280.

Required:

a. Compute the Assessable Profit. (11 Marks)
b. Compute the Chargeable Profit. (5 Marks)
c. Compute the Assessable Tax. (1 Mark)
d. Compute the Chargeable Tax. (2 Marks)
e. Compute the Tertiary Education Tax. (1 Mark)

Answer

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Tags: Assessable Tax, Chargeable Tax, Petroleum Profits, Tertiary Education Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

Question

Nigerian National Petroleum Corporation (NNPC) is one of the regulatory agencies in the Oil and Gas sector of the Nigerian economy. NNPC, through its subsidiaries, carries out various regulatory functions.

a. State any FIVE activities of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. (5 Marks)

b. State the importance of an Oil Mining Lease and an Oil Prospecting Lease. (2 Marks)

c. **Mr. Gillani Azurhi intimated you about his desire to invest in any company engaged in petroleum operations. One of his friends advised him against the petroleum sector in view of the current low price of crude oil in the international market and the high cost of domestic operations. He declined the advice, arguing that the price will not remain at its current low level as Nigeria will not be in recession forever.

On his own, he carried out some research using the internet. He presented you with the following financial extracts of Joji Petroleum Company Limited, which he obtained from the internet:**

Details	Amount (₦’000)
Current year capital allowances	6,080
Previous years’ capital allowances (b/f)	8,901
Custom duty	125
Royalties not included in the accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Assume a tax rate of 85%. You are required to:
i. Compute and explain the significance of Adjusted Profit. (9 Marks)
ii. Compute and explain the significance of Chargeable Profit. (2 Marks)
iii. Compute and explain the significance of Chargeable Tax. (2 Marks)

Answer

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Tags: Adjusted Profit, Chargeable Profit, Chargeable Tax, NPDC Activities, Oil Mining Lease, Oil Prospecting Lease
Level: Level 3

Topic: Taxation of Companies
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

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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 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

Question

Mr. Gillani Azurhi is considering investing in a petroleum company and has provided financial extracts of Joji Petroleum Company Limited for analysis.

Financial Data Provided:

Item	N’000
Current year capital allowances	6,080
Previous years’ capital allowances b/f	8,901
Custom duty	125
Royalties not included in accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Tax Rate: 85%

Required:

Compute and explain the significance of each of the following:

i) Adjusted profit (9 Marks)
ii) Chargeable profit (2 Marks)
iii) Chargeable tax (2 Marks)

Answer

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Tags: Adjusted Profit, Capital Allowance, Chargeable Profit, Chargeable Tax, Petroleum Tax
Level: Level 3

Topic: 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.

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

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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

ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)

Compute assessable and chargeable profits, assessable and chargeable taxes, and tertiary education tax for Sky Petroleum Plc.

Question

Details	Amount
Crude Oil Exported	3,500,000 barrels
Crude Oil Used Locally	1,200,000 barrels at ₦100 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
Allowance for Bad Debts – General	₦7,500,000
Allowance for Bad Debts – Specific	₦11,200,000
Depreciation	₦7,250,000
Losses Brought Forward	₦13,200,000

Qualifying Capital Expenditure:

Asset	Date Acquired	Location	Amount (₦)
Pipeline and Storage Tanks	March 2014	Continental Shelf (190m water depth)	₦48,000,000
Plant and Machinery	June 2012	Territorial Waters (90m water depth)	₦63,800,000
Furniture and Fittings	May 2011	Territorial Waters (95m water depth)	₦21,000,000
Building	April 2013	Onshore	₦71,000,000

Breakdown of Management and Administration Expenses:

Item	Amount (₦)
Donations to Political Parties	₦8,500,000
Expenditure for Petroleum Deposit Information	₦4,700,000
Companies Income Tax of an Associated Company	₦5,000,000
Interest on Inter-Company Loans (at 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
Rents Paid for Oil Prospecting License	₦3,600,000
Other Administrative Expenses	₦32,000,000
Total	₦240,500,000

Additional Information:

International market price of crude oil in 2014 was USD $75 per barrel.
Exchange rate: USD $1 = ₦280.

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Tax, Chargeable Tax, Petroleum Profits, Tertiary Education Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

Question

a. State any FIVE activities of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. (5 Marks)

b. State the importance of an Oil Mining Lease and an Oil Prospecting Lease. (2 Marks)

On his own, he carried out some research using the internet. He presented you with the following financial extracts of Joji Petroleum Company Limited, which he obtained from the internet:**

Details	Amount (₦’000)
Current year capital allowances	6,080
Previous years’ capital allowances (b/f)	8,901
Custom duty	125
Royalties not included in the accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Chargeable Profit, Chargeable Tax, NPDC Activities, Oil Mining Lease, Oil Prospecting Lease
Level: Level 3

Topic: Taxation of Companies
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 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

Question

Mr. Gillani Azurhi is considering investing in a petroleum company and has provided financial extracts of Joji Petroleum Company Limited for analysis.

Financial Data Provided:

Item	N’000
Current year capital allowances	6,080
Previous years’ capital allowances b/f	8,901
Custom duty	125
Royalties not included in accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Tax Rate: 85%

Required:

Compute and explain the significance of each of the following:

i) Adjusted profit (9 Marks)
ii) Chargeable profit (2 Marks)
iii) Chargeable tax (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Capital Allowance, Chargeable Profit, Chargeable Tax, Petroleum Tax
Level: Level 3

Topic: 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.

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

Question Tag: Chargeable Tax

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ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)

Compute assessable and chargeable profits, assessable and chargeable taxes, and tertiary education tax for Sky Petroleum Plc.

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

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

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

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

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.

ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)

Compute assessable and chargeable profits, assessable and chargeable taxes, and tertiary education tax for Sky Petroleum Plc.

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

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

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

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

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.

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Question Tag: Chargeable Tax

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ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)

Compute assessable and chargeable profits, assessable and chargeable taxes, and tertiary education tax for Sky Petroleum Plc.

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AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

You're reporting an error for "AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies"

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 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q2c – 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)"

ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)

Compute assessable and chargeable profits, assessable and chargeable taxes, and tertiary education tax for Sky Petroleum Plc.

You're reporting an error for "ATAX – May 2016 – L3 – Q2 – Petroleum Profits Tax (PPT)"

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

You're reporting an error for "AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies"

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 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q2c – 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)"

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