Plant and Machinery – NBC Institute

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

Question

Obioma and Sons Limited, a company based in Emene – Enugu, has been producing vegetable oil since 2015. It has been a leading name in the production of a popular brand of household vegetable oil known as “Abop,” which is in high demand.

Given the fact that the company is doing very well, it secured funds from its bankers and bought additional Plant and Machinery in excess of its immediate needs on June 1, 2013 for N24,600,000. The Finance Director convinced the Board to dispose part of the plant and machinery to boost the company’s working capital. Consequently, on December 31, 2015, the company sold part of the Plant and Machinery for N37,925,000 and spent N5,125,000 as expenses incidental to the sale. The market value of the remaining Plant and Machinery was N15,375,000 as at December 31, 2015.

However, the issue of the tax implications of these transactions is worrisome to the Managing Director, who is visibly disturbed that the Federal Inland Revenue Service (FIRS) might come after the company.

As the tax consultant to the company, you are required to:

a) State any FOUR Chargeable Assets. (2 Marks)
b) State any FOUR conditions for granting Roll-Over Relief. (8 Marks)
c) Compute the Chargeable Gains on the asset sold. (4 Marks)
d) Compute the Capital Gains Tax. (2 Marks)
e) Compute the new cost of the remaining asset. (4 Marks)

Answer

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Tags: Asset Disposal, Capital Gains, Chargeable assets, Plant and Machinery, Roll-Over Relief
Level: Level 3

Topic: Capital Gains Tax (CGT)

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

Question

Microfin Garment Nigeria Plc has been in business for many years as a textile manufacturer. At a recent annual general meeting, shareholders noted a decline in profitability, market share price, and dividends. They observed a particular product line was underperforming due to competition, and a reorganization was agreed upon to be completed within quarter 3 of the new financial year.

The Board of Directors complied with the shareholders’ resolution, deciding to:

Relieve the General Manager (Mr. Chukwu Bala) and Operations Manager (Mr. Ojo Ekaite) of their jobs due to the underperforming segment. They were compensated N12 million and N7.5 million, respectively.
Redeploy production and administrative staff to other branches.

Dispose of qualifying property, plant, and equipment with details as follows:

Asset	Cost (N’000)	Tax Written Down Value (N’000)	Sales Proceeds (N’000)
Industrial building	85,000	36,125	123,900
Plant and machinery	128,500	16,062.5	80,000 and 60,000
Factory equipment	150,600	37,650	160,000

Additional Notes:

Industrial building: Acquired in 2014, with renovation costs of N288,000 and incidental expenses of N150,000 prior to disposal in February 2021. N100.2 million of the proceeds were used in July 2021 to acquire a new building for the head office.
Plant and machinery: Acquired in 2017, partially sold in April 2021 for N80 million. The undisposed part had a market value of N65.3 million and was sold in August 2021 for N60 million, with N30,000 in incidental expenses.
Factory equipment: Acquired in 2018, sold in September 2021 at a market value of N162.5 million after incurring N250,000 refurbishment costs.

Required:

As the company’s Tax Consultant, you are to submit a report to the Managing Director showing:

a. The capital gains (if any) and the capital gains tax payable on:

Disposal and subsequent acquisition of the industrial building (7 Marks)
Disposal of plant and machinery (6 Marks)
Disposal of factory equipment (3 Marks)

b. State the due dates for filing of self-assessment returns and payment of tax computed on each asset disposed of. (2 Marks)

c. Comment on the provisions of the Finance Act 2020 regarding compensation for loss of office for the two staff members disengaged by the company. (2 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Gains, Factory Equipment, Finance Act 2020, Industrial Building, Plant and Machinery
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2022

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

Question

The information below relates to the plant and machinery account of Perfect Fit Designers for the year ended 31 December 2012:

What should be the amount of depreciation charged to the income statement during the year if the plant and machinery were depreciated at 20% per annum on a straight line basis?

Answer

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Tags: Depreciation, Plant and Machinery, Straight-Line Method
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

Question

As the tax consultant to the company, you are required to:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Asset Disposal, Capital Gains, Chargeable assets, Plant and Machinery, Roll-Over Relief
Level: Level 3

Topic: Capital Gains Tax (CGT)

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

Question

The Board of Directors complied with the shareholders’ resolution, deciding to:

Relieve the General Manager (Mr. Chukwu Bala) and Operations Manager (Mr. Ojo Ekaite) of their jobs due to the underperforming segment. They were compensated N12 million and N7.5 million, respectively.
Redeploy production and administrative staff to other branches.

Dispose of qualifying property, plant, and equipment with details as follows:

Asset	Cost (N’000)	Tax Written Down Value (N’000)	Sales Proceeds (N’000)
Industrial building	85,000	36,125	123,900
Plant and machinery	128,500	16,062.5	80,000 and 60,000
Factory equipment	150,600	37,650	160,000

Additional Notes:

Industrial building: Acquired in 2014, with renovation costs of N288,000 and incidental expenses of N150,000 prior to disposal in February 2021. N100.2 million of the proceeds were used in July 2021 to acquire a new building for the head office.
Plant and machinery: Acquired in 2017, partially sold in April 2021 for N80 million. The undisposed part had a market value of N65.3 million and was sold in August 2021 for N60 million, with N30,000 in incidental expenses.
Factory equipment: Acquired in 2018, sold in September 2021 at a market value of N162.5 million after incurring N250,000 refurbishment costs.

Required:

As the company’s Tax Consultant, you are to submit a report to the Managing Director showing:

a. The capital gains (if any) and the capital gains tax payable on:

Disposal and subsequent acquisition of the industrial building (7 Marks)
Disposal of plant and machinery (6 Marks)
Disposal of factory equipment (3 Marks)

b. State the due dates for filing of self-assessment returns and payment of tax computed on each asset disposed of. (2 Marks)

c. Comment on the provisions of the Finance Act 2020 regarding compensation for loss of office for the two staff members disengaged by the company. (2 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Gains, Factory Equipment, Finance Act 2020, Industrial Building, Plant and Machinery
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2022

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

Question

The information below relates to the plant and machinery account of Perfect Fit Designers for the year ended 31 December 2012:

What should be the amount of depreciation charged to the income statement during the year if the plant and machinery were depreciated at 20% per annum on a straight line basis?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Plant and Machinery, Straight-Line Method
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

Question Tag: Plant and Machinery

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ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

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ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)"

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

You're reporting an error for "AT – Nov 2022 – L3 – Q3 – Capital Gains Tax"

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

You're reporting an error for "FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts"

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)"

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

You're reporting an error for "AT – Nov 2022 – L3 – Q3 – Capital Gains Tax"

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

You're reporting an error for "FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts"

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