Topic: Companies Income Tax (CIT)

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AT – May – 2018 – L3 – SC – Q6 – Companies Income Tax (CIT)

Tax computation for Obi Airlines Limited operating in Ethiopia, including Total Profits and tax liabilities in Nigeria for income sourced from Nigeria.

Question

Chief Bonny Chizaram is the Chairman/CEO of Chizaram group of companies. The conglomerate operates in several states of Nigeria, with business interests in supply of building materials, transport, and banking.

In 2012, under the Chairman’s directive, the group decided to diversify its business into some African countries by establishing Obi Airlines Limited, incorporated in Ethiopia.

On May 25, 2016, as Chief Chizaram was in the executive lounge of Murtala Mohammed International Airport, Lagos, awaiting departure, he met his long-time friend and business colleague, Chief Roger Menkiti, who is also an entrepreneur.

During their discussion, Chief Menkiti expressed interest in understanding the benefits of investing in Ethiopia, with concerns about Companies Income Tax and Tertiary Education Tax payable in Nigeria if he started an airline business in Ethiopia.

The financial results of Obi Airlines Limited for the year ended December 31, 2015, are as follows:

Description	Amount (₦)
Income from passenger flights on other routes	213,668,750
Income from cargo loaded into aircraft on other routes	218,280,000
Income from passenger flights from Nigeria	54,401,275
Income from cargo loaded into aircraft from Nigeria	49,938,180
Total Income	536,288,205
Deduct:
Depreciation	1,974,125
Staff salaries	14,373,968
General provision	215,050
Other expenses	579,913
Total Deductions	17,143,056
Net Profit	519,145,149

Additional Information:

Capital allowances were agreed with the relevant authority at 110% of the depreciation charged.
Other expenses include disallowable expenses amounting to ₦425,000.

Required:

As the Tax Consultant, prepare computations showing:

a. Total Profits of Obi Airlines Limited for Nigerian tax purposes. (12 Marks)
b. Companies Income Tax Liability for the relevant year of assessment. (2 Marks)
c. Tertiary Education Tax Liability. (1 Mark)

(Total 15 Marks)

Answer

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Tags: Airline Taxation, Companies Income Tax, Non-Resident Companies, Tax Liability, Tertiary Education Tax
Level: Level 3

Topic: Companies Income Tax (CIT)
Series: MAY 2018

TAX – May 2015 – L2 – SC – Q5 – Companies Income Tax (CIT)

Schedule of capital expenditure allocation for Covenant Construction Limited with assessment basis and treatment of capital expenditure.

Question

Covenant Construction Limited commenced business on 3 August 2011, making up accounts to 31 July annually. The schedule of assets acquired prior to commencement of the business is as shown below:

Description	₦
Tractors and Grader	7,500,000
Motor vehicles for field operations	13,500,000
Construction site (Factory building)	11,250,000
Furniture, Fixtures and Fittings	778,250

Covenant Construction Limited won another contract and additional assets were purchased as stated below:

Date of Purchase	Description	Number of Items	Cost (₦)
Nov. 2011	Plant & Machinery	3	580,000
April 2012	Motor vehicle	1	1,375,000
Aug. 2012	Building	1	1,350,000
Jan. 2013	Generator	1	450,000
June 2013	Factory extension	1	575,000
Nov. 2013	Pick-up van	2	1,050,000

At the last Board meeting, the Directors argued on what benefits will accrue to Covenant Construction Limited on Capital Expenditure incurred before and after commencement of business.

They were also interested in knowing the years that will be affected and the impact it will have on the company’s Total Profit.

You have been invited by the Finance Director of the company who asked you to look into these matters. The Finance Director has asked you to specifically address the following:

Required:

a. Prepare the schedule of Capital Expenditure Allocation and identify the Qualifying Expenditure based on which Capital Allowances are claimable: i. Normal basis of assessment (5 Marks)
ii. Revised basis of assessment (based on taxpayer’s right of election) (5 Marks)

b. Explain the treatment of Capital Expenditure acquired by Covenant Construction Limited before it commenced business on 3 August 2011. (2 Marks)

c. State the relevant tax years and corresponding basis period covered by the data above. (3 Marks)

Answer

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Tags: Asset Schedule, Capital Allowance, Capital Expenditure, Normal Basis, Qualifying Expenditure, Revised Basis
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Question

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

Even with the increase in profits in 2011 and 2012, the Managing Director was of the opinion that it is better to cut the company’s losses, once and for all, by winding-up the company. However, the Finance Director disagreed and argued that since the company’s performance was now improving, it should continue to operate.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year	Profits (₦)
Year ended 31 May 2009	540,000
Year ended 31 May 2010	300,000
Seven months to 31 December 2010	645,000
Year ended 31 December 2011	1,575,000
Year ended 31 December 2012	1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

a. Identify the steps involved in the event that HOPEFUL Limited adopts the change of accounting date. (6 Marks)
b. Compute the Assessable profits for 2011 – 2013, if the option to change accounting date is accepted, using both the old and the new dates. (7 Marks)
c. Compute the Assessable profits for the relevant years if the cessation option is accepted using the normal basis and the revised basis of assessment. (7 Marks)

Answer

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Tags: Assessable Profit, Change of Accounting Date, Companies Income Tax, Financial Accounting, Tax computation, Tax Planning
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – May 2017 – L2 – SC – Q6 – Companies Income Tax

Compute capital allowances and determine total profits, CIT, and TET for a manufacturing company.

Question

Campbell Limited, located in Arama Town, has been in business since 1994 and manufactures plastic containers. The company’s accounts for the year ended December 31, 2014, showed the following results:

Additional Information:

Unutilised Capital Allowance brought forward: N70,000
Tax Written Down Values of assets purchased in 2011:
- Motor vehicles: N40,000
- Furniture and Fittings: N60,000
- Plant: N70,000
In 2014, the company purchased the following assets:
- 2 Motor vehicles: N840,000
- 4 Furniture and Fittings: N160,000
- 1 Generating set: N300,000

Required:

a. Compute Capital Allowances assuming assets purchased in 2011 have been used for two years. (7 Marks)
b. Compute the Total Profits, Companies Income Tax (CIT), and Tertiary Education Tax (TET) for the relevant year of assessment. (8 Marks)

Answer

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Tags: Capital allowances, CIT, Corporate Tax, Tertiary Education Tax
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2017

TAX – May 2023 – L2 – SA – Q4 – Companies Income Tax

Calculate assessable profit basis periods and capital allowances for Wizzy-Baddo Ltd.

Question

As part of the induction program for the newly recruited staff of your firm of tax consultants, you have been tasked with a presentation on companies’ income tax computation for beginners during the firm’s training session.

You are provided with the following information relating to Wizzy-Baddo Limited, which commenced business on September 1, 2020:

Adjusted Profit:
- Period to December 31, 2020: N6,937,500
- Year ended December 31, 2021: N9,300,500

The following assets were acquired as follows:

Date	Asset	Cost (N)
June 5, 2020	Land and building	5,467,500
July 1, 2020	Motor vehicle	10,000,000
October 15, 2020	Machinery	4,375,000
February 28, 2021	Furniture	3,458,000
May 1, 2021	Delivery van	4,750,000

Required:

a. State the basis periods for assessable profits and qualifying capital expenditure. (5 Marks)

b. Compute the capital allowances.

Answer

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Tags: Basis Periods, Capital allowances, Companies Income Tax, Qualifying Capital Expenditure
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2023

TAX – Nov 2014 – L2 – Q5 – Companies Income Tax (CIT)

Compute adjusted profit, tax ratios, total profit, and income tax for Kenky Limited.

Question

Kenky Limited, an Austrian company, operates cable undertakings in Nigeria and has significant business in several African countries. The Nigerian Revenue Authority disputed the company’s financial returns, resulting in a Best of Judgement (BoJ) Assessment. Below is an extract from Kenky Limited’s income statement for the fiscal year ending 30 September 2012:

Notes:

The Federal Inland Revenue Service (FIRS) considers both Nigerian and Austrian operations under specialized business taxation.
The Austrian authority verified the Adjusted Profit and Depreciation Ratios.
A donation to Jeje, totaling ₦40,000,000, is part of the overhead expenses.

Requirements: a. Compute the Adjusted Profit for the year. (4 Marks)
b. Determine the Adjusted Profit Ratio and Depreciation Ratio. (4 Marks)
c. Compute the Total Profits and Income Tax payable in Nigeria. (4 Marks)
d. List other business activities, besides cable messages, recognized under specialized business taxation. (3 Marks)

Answer

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Tags: Adjusted Profit, Capital Allowance, Depreciation, Income Tax, Specialized Businesses
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: NOV 2014

TAX – Nov 2014 – L2 – Q3 – Companies Income Tax (CIT)

Determine basis periods, tax liabilities, and conditions for loss reliefs and capital allowances for Gab Pal Limited.

Question

Gab Pal Limited commenced business on 1 May 2008. The company makes up its accounts to 31 August each year. Below is the data for the company’s trading activities:

Year	Adjusted Profit/Loss (₦’000)
Period ended 31 August 2009 (16 months)	(390,000)
Year ended 31 August 2010	170,000
Year ended 31 August 2011	150,000

The capital allowances for the relevant assessment years are as follows:

Assessment Year	Capital Allowance (₦’000)
2008	20,000
2009	18,000
2010	12,000
2011	8,000
2012	5,000

Requirements:

a. Determine the basis periods and the tax liabilities for the relevant years. (Ignore the Taxpayer’s right of election) (10 Marks)

b. State the TWO types of Loss reliefs acceptable to the tax authority. (2 Marks)

c. State the conditions that must be satisfied by a taxpayer to enjoy the loss reliefs stated in (b). (5 Marks)

d. State the conditions for the grant of Capital Allowances to taxpayers

Answer

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Tags: Basis Period, Capital Allowance, Loss relief, Tax liabilities
Level: Level 2

Topic: Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – Nov 2014 – L2 – Q2 – Companies Income Tax (CIT)

Calculate assessable profits, capital allowances, and total profits for MESINOY Ltd. upon winding up.

Question

MESINOY Limited has been carrying on business in Nigeria for many years. The company makes up its accounts to 31 December each year. Due to the increasing costs of operating in Nigeria, the board of directors decided to wind up the company’s business in Nigeria and relocate to a more tax-friendly country as of 31 May 2011.

Tax laws specify that a company winding up its business must comply with specific regulations. MESINOY Limited’s unutilized Capital Allowances were agreed upon by the tax authority, amounting to N460,000. The company applied for a claim to carry back this unutilized Capital Allowance, which was granted by the tax authority. Below are the adjusted profits for the relevant periods:

Year Ended	Adjusted Profit (₦)
31 December 2009	520,000
31 December 2010	450,000
31 May 2011	300,000

Additionally, a bad debt of N58,000 was recovered on 30 November 2011.

Requirements:

a. Compute the Assessable Profits of the company for the relevant years of assessment. (5 Marks)

b. Calculate the Capital Allowances to be rolled back to the relevant years. (5 Marks)

c. Compute the Total Profits for the relevant years of assessment. (5 Marks)

d. Briefly explain Best of Judgment (BoJ) Assessment. (5 Marks)

Answer

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Tags: Assessable Profits, Capital Allowance, Tax Rollbacks, Winding-up Business
Level: Level 2

Topic: Accounting for Government Assets and Liabilities, Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – May 2024 – L2 – SA – Q2 – Companies Income Tax (CIT)

Calculate assessable profits and tax liabilities for Adidas Nigeria Limited following an accounting date change.

Question

Adidas Nigeria Limited has been in business for so many years. The company is into supply of furniture, fixtures and fittings. Since the date of commencement of business to the accounting year ended October 31, 2018, it had posted reasonable profits. In year 2019, a competitor, ABC Limited, was able to introduce a new brand of furniture into the market, which boosted the sales of the company. Unfortunately, this had an adverse effect on the gross turnover of Adidas Nigeria Limited. Despite concerted efforts made by Adidas Nigeria Limited to compete favourably with ABC Limited, its fortunes continued to dwindle.
To allow for capital injection, the directors of Adidas Nigeria Limited, decided on February 1, 2020, to change its accounting date to be in line with one of its foreign partners. The board, therefore, decided that the accounting year-end be changed to December 31, every year

The following additional information is provided:

Adjusted Profits:
- Year ended October 31, 2019: N24,500,000
- 14-month period ended December 31, 2020: N38,200,000
- Year ended December 31, 2021: N44,100,000
Gross Turnover:
- Year ended October 31, 2019: N49,100,200
- Period ended December 31, 2020: N75,200,500
- Year ended December 31, 2021: N101,300,000
Capital Allowances:
- Assessment year 2020: N850,000
- Assessment year 2021: N720,000
- Assessment year 2022: N600,000

Required:
For the relevant assessment years,
a. Compute the assessable profits. (14 Marks)
b. Compute the company’s income tax liabilities. Ignore minimum tax computation. (6 Marks)

Answer

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Tags: Assessable Profits, Capital allowances, Change in Accounting Date, Corporate Tax
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2024

TAX – Nov 2015 – L2 – Q6 – Companies Income Tax (CIT)

This question involves the computation of total capital allowances for JohnGab Ltd's first five years and capital allowances for the first three years of assessment.

Question

As part of the induction programme for the newly recruited staff of your firm of Tax Consultants, you have been saddled with the responsibility of making a presentation on companies tax computation for beginners during the firm’s training session.

The following data were submitted for the purpose of the training:

JohnGab Limited, a training company, was incorporated on 1 June 2008 but commenced business on 1 September 2008. The following information is made available to you:

Period	Assessable Profit (₦’000)
Four month-period ended 31 December 2008	37,500
Year ended 31 December 2009	60,000
Year ended 31 December 2010	90,000

The following assets were purchased during the period:

Date	Asset	Cost (₦’000)
5 June 2008	Land and building	17,500
1 July 2008	Motor car	6,000
15 October 2008	Machinery	14,000
28 February 2009	Furniture	3,750
1 May 2009	Delivery van	5,000

In order to clearly explain the extant rules on computation of capital allowances by
companies, you are required to:
a. State the basis periods of assessment and compute the total capital allowances for the first five years of assessment. (5 Marks)
b. Calculate the capital allowances due to be utilized for the first three years of assessment in respect of the qualifying capital expenditure incurred by the company. (5 Marks)

Answer

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Tags: Asset Depreciation, Basis Period, Business Commencement, Capital Allowance, Tax computation
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: NOV 2015

AT – May – 2018 – L3 – SC – Q6 – Companies Income Tax (CIT)

Tax computation for Obi Airlines Limited operating in Ethiopia, including Total Profits and tax liabilities in Nigeria for income sourced from Nigeria.

Question

In 2012, under the Chairman’s directive, the group decided to diversify its business into some African countries by establishing Obi Airlines Limited, incorporated in Ethiopia.

The financial results of Obi Airlines Limited for the year ended December 31, 2015, are as follows:

Description	Amount (₦)
Income from passenger flights on other routes	213,668,750
Income from cargo loaded into aircraft on other routes	218,280,000
Income from passenger flights from Nigeria	54,401,275
Income from cargo loaded into aircraft from Nigeria	49,938,180
Total Income	536,288,205
Deduct:
Depreciation	1,974,125
Staff salaries	14,373,968
General provision	215,050
Other expenses	579,913
Total Deductions	17,143,056
Net Profit	519,145,149

Additional Information:

Capital allowances were agreed with the relevant authority at 110% of the depreciation charged.
Other expenses include disallowable expenses amounting to ₦425,000.

Required:

As the Tax Consultant, prepare computations showing:

(Total 15 Marks)

Answer

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Tags: Airline Taxation, Companies Income Tax, Non-Resident Companies, Tax Liability, Tertiary Education Tax
Level: Level 3

Topic: Companies Income Tax (CIT)
Series: MAY 2018

TAX – May 2015 – L2 – SC – Q5 – Companies Income Tax (CIT)

Schedule of capital expenditure allocation for Covenant Construction Limited with assessment basis and treatment of capital expenditure.

Question

Covenant Construction Limited commenced business on 3 August 2011, making up accounts to 31 July annually. The schedule of assets acquired prior to commencement of the business is as shown below:

Description	₦
Tractors and Grader	7,500,000
Motor vehicles for field operations	13,500,000
Construction site (Factory building)	11,250,000
Furniture, Fixtures and Fittings	778,250

Covenant Construction Limited won another contract and additional assets were purchased as stated below:

Date of Purchase	Description	Number of Items	Cost (₦)
Nov. 2011	Plant & Machinery	3	580,000
April 2012	Motor vehicle	1	1,375,000
Aug. 2012	Building	1	1,350,000
Jan. 2013	Generator	1	450,000
June 2013	Factory extension	1	575,000
Nov. 2013	Pick-up van	2	1,050,000

At the last Board meeting, the Directors argued on what benefits will accrue to Covenant Construction Limited on Capital Expenditure incurred before and after commencement of business.

They were also interested in knowing the years that will be affected and the impact it will have on the company’s Total Profit.

You have been invited by the Finance Director of the company who asked you to look into these matters. The Finance Director has asked you to specifically address the following:

Required:

b. Explain the treatment of Capital Expenditure acquired by Covenant Construction Limited before it commenced business on 3 August 2011. (2 Marks)

c. State the relevant tax years and corresponding basis period covered by the data above. (3 Marks)

Answer

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Tags: Asset Schedule, Capital Allowance, Capital Expenditure, Normal Basis, Qualifying Expenditure, Revised Basis
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Question

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year	Profits (₦)
Year ended 31 May 2009	540,000
Year ended 31 May 2010	300,000
Seven months to 31 December 2010	645,000
Year ended 31 December 2011	1,575,000
Year ended 31 December 2012	1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

Answer

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Tags: Assessable Profit, Change of Accounting Date, Companies Income Tax, Financial Accounting, Tax computation, Tax Planning
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – May 2017 – L2 – SC – Q6 – Companies Income Tax

Compute capital allowances and determine total profits, CIT, and TET for a manufacturing company.

Question

Additional Information:

Unutilised Capital Allowance brought forward: N70,000
Tax Written Down Values of assets purchased in 2011:
- Motor vehicles: N40,000
- Furniture and Fittings: N60,000
- Plant: N70,000
In 2014, the company purchased the following assets:
- 2 Motor vehicles: N840,000
- 4 Furniture and Fittings: N160,000
- 1 Generating set: N300,000

Required:

Answer

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Tags: Capital allowances, CIT, Corporate Tax, Tertiary Education Tax
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2017

TAX – May 2023 – L2 – SA – Q4 – Companies Income Tax

Calculate assessable profit basis periods and capital allowances for Wizzy-Baddo Ltd.

Question

You are provided with the following information relating to Wizzy-Baddo Limited, which commenced business on September 1, 2020:

Adjusted Profit:
- Period to December 31, 2020: N6,937,500
- Year ended December 31, 2021: N9,300,500

The following assets were acquired as follows:

Date	Asset	Cost (N)
June 5, 2020	Land and building	5,467,500
July 1, 2020	Motor vehicle	10,000,000
October 15, 2020	Machinery	4,375,000
February 28, 2021	Furniture	3,458,000
May 1, 2021	Delivery van	4,750,000

Required:

a. State the basis periods for assessable profits and qualifying capital expenditure. (5 Marks)

b. Compute the capital allowances.

Answer

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Tags: Basis Periods, Capital allowances, Companies Income Tax, Qualifying Capital Expenditure
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2023

TAX – Nov 2014 – L2 – Q5 – Companies Income Tax (CIT)

Compute adjusted profit, tax ratios, total profit, and income tax for Kenky Limited.

Question

Notes:

The Federal Inland Revenue Service (FIRS) considers both Nigerian and Austrian operations under specialized business taxation.
The Austrian authority verified the Adjusted Profit and Depreciation Ratios.
A donation to Jeje, totaling ₦40,000,000, is part of the overhead expenses.

Answer

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Tags: Adjusted Profit, Capital Allowance, Depreciation, Income Tax, Specialized Businesses
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: NOV 2014

TAX – Nov 2014 – L2 – Q3 – Companies Income Tax (CIT)

Determine basis periods, tax liabilities, and conditions for loss reliefs and capital allowances for Gab Pal Limited.

Question

Gab Pal Limited commenced business on 1 May 2008. The company makes up its accounts to 31 August each year. Below is the data for the company’s trading activities:

Year	Adjusted Profit/Loss (₦’000)
Period ended 31 August 2009 (16 months)	(390,000)
Year ended 31 August 2010	170,000
Year ended 31 August 2011	150,000

The capital allowances for the relevant assessment years are as follows:

Assessment Year	Capital Allowance (₦’000)
2008	20,000
2009	18,000
2010	12,000
2011	8,000
2012	5,000

Requirements:

a. Determine the basis periods and the tax liabilities for the relevant years. (Ignore the Taxpayer’s right of election) (10 Marks)

b. State the TWO types of Loss reliefs acceptable to the tax authority. (2 Marks)

c. State the conditions that must be satisfied by a taxpayer to enjoy the loss reliefs stated in (b). (5 Marks)

d. State the conditions for the grant of Capital Allowances to taxpayers

Answer

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Tags: Basis Period, Capital Allowance, Loss relief, Tax liabilities
Level: Level 2

Topic: Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – Nov 2014 – L2 – Q2 – Companies Income Tax (CIT)

Calculate assessable profits, capital allowances, and total profits for MESINOY Ltd. upon winding up.

Question

Year Ended	Adjusted Profit (₦)
31 December 2009	520,000
31 December 2010	450,000
31 May 2011	300,000

Additionally, a bad debt of N58,000 was recovered on 30 November 2011.

Requirements:

a. Compute the Assessable Profits of the company for the relevant years of assessment. (5 Marks)

b. Calculate the Capital Allowances to be rolled back to the relevant years. (5 Marks)

c. Compute the Total Profits for the relevant years of assessment. (5 Marks)

d. Briefly explain Best of Judgment (BoJ) Assessment. (5 Marks)

Answer

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Tags: Assessable Profits, Capital Allowance, Tax Rollbacks, Winding-up Business
Level: Level 2

Topic: Accounting for Government Assets and Liabilities, Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – May 2024 – L2 – SA – Q2 – Companies Income Tax (CIT)

Calculate assessable profits and tax liabilities for Adidas Nigeria Limited following an accounting date change.

Question

The following additional information is provided:

Adjusted Profits:
- Year ended October 31, 2019: N24,500,000
- 14-month period ended December 31, 2020: N38,200,000
- Year ended December 31, 2021: N44,100,000
Gross Turnover:
- Year ended October 31, 2019: N49,100,200
- Period ended December 31, 2020: N75,200,500
- Year ended December 31, 2021: N101,300,000
Capital Allowances:
- Assessment year 2020: N850,000
- Assessment year 2021: N720,000
- Assessment year 2022: N600,000

Required:
For the relevant assessment years,
a. Compute the assessable profits. (14 Marks)
b. Compute the company’s income tax liabilities. Ignore minimum tax computation. (6 Marks)

Answer

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Tags: Assessable Profits, Capital allowances, Change in Accounting Date, Corporate Tax
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2024

TAX – Nov 2015 – L2 – Q6 – Companies Income Tax (CIT)

This question involves the computation of total capital allowances for JohnGab Ltd's first five years and capital allowances for the first three years of assessment.

Question

The following data were submitted for the purpose of the training:

JohnGab Limited, a training company, was incorporated on 1 June 2008 but commenced business on 1 September 2008. The following information is made available to you:

Period	Assessable Profit (₦’000)
Four month-period ended 31 December 2008	37,500
Year ended 31 December 2009	60,000
Year ended 31 December 2010	90,000

The following assets were purchased during the period:

Date	Asset	Cost (₦’000)
5 June 2008	Land and building	17,500
1 July 2008	Motor car	6,000
15 October 2008	Machinery	14,000
28 February 2009	Furniture	3,750
1 May 2009	Delivery van	5,000

Answer

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Tags: Asset Depreciation, Basis Period, Business Commencement, Capital Allowance, Tax computation
Level: Level 2