- 20 Marks
TAX – May 2024 – L2 – SA – Q4 – Cost-Volume-Profit (CVP) Analysis
Compute minimum tax liability for Pkikan Nigeria Ltd and discuss exemptions and basis.
Question
Pkikan Nigeria Limited has been in business for several years and prepares accounts annually to December 31. The following data is available for the year ended December 31, 2021:
| Description | Amount (N’000) |
|---|---|
| Turnover | 1,300 |
| Cost of Sales | (400) |
| Gross Profit | 900 |
| Less: Total Expenses | (1,100) |
| Net Loss for the Year | (200) |
Additional information:
You were informed that:
(ii) After the review of the company‟s accounting records, N400,000 meant for the Managing Director of the company was erroneously included in the turnover for the year.
(iii) The issued share capital of the business was N1.8 million, out of which, the shareholders representing N300,000 are yet to pay the final call.
(iv) The net assets of the company was N850,000.
(v) There was a loss brought forward of N210,000 relating to the previous year ofassessment and the agreed capital allowance with the Revenue was N385,000.
Required:
a. Compute the minimum tax liability for the assessment year. (14 Marks)
b. Explain the reasons for calculating minimum tax liability. (3 Marks)
c. Identify companies exempt from minimum tax liability calculations. (3 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Corporate Tax, Exemptions, Minimum Tax Liability, Nigeria Tax Law
- Level: Level 2
- Topic: Cost-Volume-Profit (CVP) Analysis
- Series: MAY 2024