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AT – Nov 2014 – L3 – SB – Q3 – Petroleum Profits Tax (PPT)
Calculate the total tax liabilities of Jisosi Petroleum Limited to aid in dividend decision-making.
Question
The Independent Auditors of Jisosi Petroleum Limited submitted the draft Audited Financial Statements for the year ended 31 December 2013 for management’s discussion. The executive summary revealed total revenue of N286,650,000 and Profit Before Taxation of N82,642,000.
To arrive at the proposed dividend for the consideration of the Board, there is a need to determine the total tax liabilities for the year. The draft Statement of Profit or Loss includes the following items among others:
| Expense Item | Amount (N) |
|---|---|
| Royalty on Crude Oil sold | 13,500,000 |
| Cost of Well Drilling | 25,000,000 |
| Custom Duties | 500,000 |
| Clearing of Oil Spillage | 7,500,000 |
| Depreciation | 32,000,000 |
| Donations | 4,500,000 |
| Community Relations Expenses | 10,000,000 |
| Transportation Expenses for 2012 | 8,500,000 |
Additionally, the revenue includes:
- Profit on Property, Plant, and Equipment sold: N48,000
- Income from transportation of crude oil for the year ended 31 December 2012: N16,894,000
The officials of Federal Inland Revenue Service (FIRS) and the Company agreed as follows:
| Item | Amount (N) |
|---|---|
| Annual Allowances on exploration | 25,500,000 |
| Balancing Charge on exploration | 242,000 |
| Capital Allowances on exploration b/f | 11,000,000 |
| Petroleum Investment Allowance | 18,500,000 |
| Capitalised Intangible Drilling Cost | 14,000,000 |
| Losses b/f | 10,000,000 |
| Capital Allowances on transportation | 750,000 |
Required:
Determine the total tax liabilities of the company for the consideration of the directors to aid in the proposed dividend decision.
Find Related Questions by Tags, levels, etc.
- Tags: Dividend Computation, Oil Industry, Petroleum Profits Tax, Tax liabilities
- Level: Level 3
- Topic: Petroleum Profits Tax (PPT)
- Series: NOV 2014