Current Tax – NBC Institute

FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

Question

Skelewu Nigeria Limited owns the following Property, Plant and Equipment as at 31 December 2011.

Additional pieces of information are:

(i) Plant and Machinery are depreciated on a straight-line basis over 5 years. The plant & machinery was acquired on 1 January 2011.
(ii) Land is not depreciated.
(iii) Buildings are depreciated on a straight-line basis over 25 years.
(iv) Depreciation on office buildings is not deductible for tax purposes, but for the plant and machinery; tax deductible is granted over a period of 3 years in the ratio 50:30:20 percent of cost consecutively.
(v) The accounting profit before tax amounted to N15,000,000 for the 2012 financial year and N20,000,000 for the year 2013. These figures include non-taxable revenue of N4,000,000 in year 2012 and N5,000,000 in year 2013.
(vi) Skelewu Nigeria Limited had a tax loss on 31 December 2011 of N12,500,000. The tax rate for year 2011 was 35% and 30% for each of the years 2012 and 2013.

Required:

a. In accordance with IAS 12 on Income Taxes, differentiate between Current Tax and Deferred Tax. (2 Marks)

b. Prepare the Deferred Tax Account for the year ended 31 December 2013. (10 Marks)

c. Advise the Directors of Skelewu Nigeria Limited on the reasons why it is necessary to recognize or make provision for Deferred Tax in the company’s Financial Statements. (3 Marks)

Answer

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Tags: Current Tax, Deferred Tax, Depreciation, Plant and Equipment, Property
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: NOV 2014

FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes

Explains the qualitative characteristics of financial statements and describes the methods of valuation for property, plant, and equipment.

Question

a. The Conceptual Framework for Financial Reporting states the qualitative characteristics of financial information.

Required:
Identify and explain FIVE qualitative characteristics of general-purpose financial statements. (10 Marks)

b. IAS 16 prescribes the principles and the valuation methods in recognizing items of property, plant, and equipment in the financial statements of an entity.

Required:
Describe the TWO methods of valuation recognized in IAS 16 on property, plant, and equipment. (5 Marks)

Answer

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Tags: Current Tax, Deferred Tax, IAS 12, Income Taxes, Tax Expense, Tax liabilities
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: MAY 2023

FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)

Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.

Question

b. Dan Ruwa Nigeria Limited is a company that specializes in the production of bottled and sachet water. The company was incorporated on January 1, 2018.

The summarised financial statements of the company for the year ended December 31, 2018, are as follows:

Extract of Statement of Profit or Loss for the year ended December 31, 2018:

Description	N’000
Revenue	270,000
Administrative and other allowable expenses	(138,000)
Accounting depreciation	(11,000)
Net profit before taxation	121,000

Extract of Statement of Financial Position as at December 31, 2018:

Description	N’000
Property, plant & equipment	48,000
Motor vehicle	12,000
Less: Depreciation	(11,000)
Carrying amount	49,000

Description	N’000
Ordinary share capital	17,000
Retained earnings	12,000
Other liabilities	20,000
Total	49,000

The Federal Inland Revenue Service (FIRS) granted the company a capital allowance on its non-current assets, which amounted to N15,000,000, and the company income tax rate is 30%.

Required:

i. Calculate the current income tax expense and the deferred tax liability balance that should be disclosed in the statement of financial position of the company as at December 31, 2018.
(10 Marks)

ii. Prepare the statement of profit or loss of Dan Ruwa Nigeria Limited showing the tax expense for the year ended December 31, 2018.
(5 Marks)

Answer

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Tags: Capital allowances, Current Tax, Deferred Tax, IAS 12, Income Tax Calculation
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: NOV 2019

FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)

Explain the concepts of current tax and deferred tax in accordance with IAS 12.

Question

a. In accordance with IAS 12 on Income Tax, the income tax expense in the statement of profit or loss is composed of two tax components:

i. Current tax
ii. Deferred tax

Required:

Explain these two tax components.
(5 Marks)

Answer

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Tags: Current Tax, Deferred Tax, IAS 12, Income Tax
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: NOV 2019

FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)

Calculate the current tax expense, deferred tax liability, and tax expense components for Yemnike Nigeria Ltd.

Question

Yemnike Nigeria Limited has an accounting profit before taxation of N225 million for the year ended December 31, 2017.

The following are extracts of the financial position of Yemnike Nigeria Limited as at December 31, 2017:

Non-Current Assets:

Item	N’000
Building	157,500
Plant and machinery	250,000
Assets held under finance lease	200,000

Receivables:

Item	N’000
Trade receivables	182,500
Interest receivable	2,500

Payables:

Item	N’000
Fines	25,000
Finance lease obligation	216,000
Interest payable	8,250

The following information is relevant:

The building was acquired by the company at a cost of N175 million at the start of the year, and it is depreciated at 10% per annum on a straight-line basis. The company’s tax consultants have stated that the company can claim N105 million capital allowance this year on the building.
The balance of plant and machinery is after providing for depreciation of N30 million, and the capital allowance claimable on it is N25 million.
The asset held under finance lease was acquired during the year. Rental expense for the lease is tax deductible. The annual lease rental is N72 million and was paid on December 31, 2017. The depreciation policy for leased assets is 20% per annum on a straight-line basis. The annual finance charge is N36.667 million.
The receivables figure is shown net of an allowance for doubtful balances of N17.5 million. A deduction for debt is only allowed for tax purposes when the debtor enters liquidation.
Interest income is taxed, and interest expense is allowable both on a cash basis. There were no opening balances for interest receivable and payable.
Provisions for fines and penalties are not allowable deductions for tax purposes.

Required:
(a) Calculate the current tax expense for the period.
(b) Calculate the deferred tax liability as at December 31, 2017.
(c) Prepare notes showing the component of the tax expense for the year.

Answer

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Tags: Current Tax, Deferred Tax, Tax Expense
Level: Level 1

Topic: Accounting for Income Taxes (IAS 12)
Series: NOV 2018

FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

Question

Skelewu Nigeria Limited owns the following Property, Plant and Equipment as at 31 December 2011.

Additional pieces of information are:

Required:

a. In accordance with IAS 12 on Income Taxes, differentiate between Current Tax and Deferred Tax. (2 Marks)

b. Prepare the Deferred Tax Account for the year ended 31 December 2013. (10 Marks)

c. Advise the Directors of Skelewu Nigeria Limited on the reasons why it is necessary to recognize or make provision for Deferred Tax in the company’s Financial Statements. (3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Tax, Deferred Tax, Depreciation, Plant and Equipment, Property
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: NOV 2014

FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes

Explains the qualitative characteristics of financial statements and describes the methods of valuation for property, plant, and equipment.

Question

a. The Conceptual Framework for Financial Reporting states the qualitative characteristics of financial information.

Required:
Identify and explain FIVE qualitative characteristics of general-purpose financial statements. (10 Marks)

b. IAS 16 prescribes the principles and the valuation methods in recognizing items of property, plant, and equipment in the financial statements of an entity.

Required:
Describe the TWO methods of valuation recognized in IAS 16 on property, plant, and equipment. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Tax, Deferred Tax, IAS 12, Income Taxes, Tax Expense, Tax liabilities
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: MAY 2023

FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)

Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.

Question

b. Dan Ruwa Nigeria Limited is a company that specializes in the production of bottled and sachet water. The company was incorporated on January 1, 2018.

The summarised financial statements of the company for the year ended December 31, 2018, are as follows:

Extract of Statement of Profit or Loss for the year ended December 31, 2018:

Description	N’000
Revenue	270,000
Administrative and other allowable expenses	(138,000)
Accounting depreciation	(11,000)
Net profit before taxation	121,000

Extract of Statement of Financial Position as at December 31, 2018:

Description	N’000
Property, plant & equipment	48,000
Motor vehicle	12,000
Less: Depreciation	(11,000)
Carrying amount	49,000

Description	N’000
Ordinary share capital	17,000
Retained earnings	12,000
Other liabilities	20,000
Total	49,000

The Federal Inland Revenue Service (FIRS) granted the company a capital allowance on its non-current assets, which amounted to N15,000,000, and the company income tax rate is 30%.

Required:

i. Calculate the current income tax expense and the deferred tax liability balance that should be disclosed in the statement of financial position of the company as at December 31, 2018.
(10 Marks)

ii. Prepare the statement of profit or loss of Dan Ruwa Nigeria Limited showing the tax expense for the year ended December 31, 2018.
(5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, Current Tax, Deferred Tax, IAS 12, Income Tax Calculation
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: NOV 2019

FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)

Explain the concepts of current tax and deferred tax in accordance with IAS 12.

Question

a. In accordance with IAS 12 on Income Tax, the income tax expense in the statement of profit or loss is composed of two tax components:

i. Current tax
ii. Deferred tax

Required:

Explain these two tax components.
(5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Tax, Deferred Tax, IAS 12, Income Tax
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: NOV 2019

FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)

Calculate the current tax expense, deferred tax liability, and tax expense components for Yemnike Nigeria Ltd.

Question

Yemnike Nigeria Limited has an accounting profit before taxation of N225 million for the year ended December 31, 2017.

The following are extracts of the financial position of Yemnike Nigeria Limited as at December 31, 2017:

Non-Current Assets:

Item	N’000
Building	157,500
Plant and machinery	250,000
Assets held under finance lease	200,000

Receivables:

Item	N’000
Trade receivables	182,500
Interest receivable	2,500

Payables:

Item	N’000
Fines	25,000
Finance lease obligation	216,000
Interest payable	8,250

The following information is relevant:

The building was acquired by the company at a cost of N175 million at the start of the year, and it is depreciated at 10% per annum on a straight-line basis. The company’s tax consultants have stated that the company can claim N105 million capital allowance this year on the building.
The balance of plant and machinery is after providing for depreciation of N30 million, and the capital allowance claimable on it is N25 million.
The asset held under finance lease was acquired during the year. Rental expense for the lease is tax deductible. The annual lease rental is N72 million and was paid on December 31, 2017. The depreciation policy for leased assets is 20% per annum on a straight-line basis. The annual finance charge is N36.667 million.
The receivables figure is shown net of an allowance for doubtful balances of N17.5 million. A deduction for debt is only allowed for tax purposes when the debtor enters liquidation.
Interest income is taxed, and interest expense is allowable both on a cash basis. There were no opening balances for interest receivable and payable.
Provisions for fines and penalties are not allowable deductions for tax purposes.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Tax, Deferred Tax, Tax Expense
Level: Level 1

Topic: Accounting for Income Taxes (IAS 12)
Series: NOV 2018

Question Tag: Current Tax

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FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes

Explains the qualitative characteristics of financial statements and describes the methods of valuation for property, plant, and equipment.

FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)

Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.

FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)

Explain the concepts of current tax and deferred tax in accordance with IAS 12.

FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)

Calculate the current tax expense, deferred tax liability, and tax expense components for Yemnike Nigeria Ltd.

FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes

Explains the qualitative characteristics of financial statements and describes the methods of valuation for property, plant, and equipment.

FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)

Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.

FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)

Explain the concepts of current tax and deferred tax in accordance with IAS 12.

FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)

Calculate the current tax expense, deferred tax liability, and tax expense components for Yemnike Nigeria Ltd.

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Question Tag: Current Tax

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FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

You're reporting an error for "FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)"

FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes

Explains the qualitative characteristics of financial statements and describes the methods of valuation for property, plant, and equipment.

You're reporting an error for "FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes"

FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)

Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.

You're reporting an error for "FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)"

FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)

Explain the concepts of current tax and deferred tax in accordance with IAS 12.

You're reporting an error for "FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)"

FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)

Calculate the current tax expense, deferred tax liability, and tax expense components for Yemnike Nigeria Ltd.

You're reporting an error for "FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)"

FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)

Analyze the Property, Plant, and Equipment of Skelewu Nigeria Limited and compute the deferred tax implications.

You're reporting an error for "FR – Nov 2014 – L2 – Q6 – Property, Plant and Equipment (IAS 16)"

FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes

Explains the qualitative characteristics of financial statements and describes the methods of valuation for property, plant, and equipment.

You're reporting an error for "FR – May 2024 – L2 – SA – Q7 – Accounting for Income Taxes"

FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)

Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.

You're reporting an error for "FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)"

FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)

Explain the concepts of current tax and deferred tax in accordance with IAS 12.

You're reporting an error for "FR – Nov 2019 – L2 – Q2a – Accounting for Income Taxes (IAS 12)"

FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)

Calculate the current tax expense, deferred tax liability, and tax expense components for Yemnike Nigeria Ltd.

You're reporting an error for "FR – Nov 2018 – L2 – SB – Q3 – Accounting for Income Taxes (IAS 12)"

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