- 15 Marks
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)
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