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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.

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:

  1. Profit on Property, Plant, and Equipment sold: N48,000
  2. 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.

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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.

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:

  1. Profit on Property, Plant, and Equipment sold: N48,000
  2. 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.

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