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Entity RH has an recognised a taxable profit of $1.Smillion for 20X1'. In Entity RH's resident country. Country M, depreciation charges and entertaining expenses are disallowed expenses. Below is some information on Entitry RH's outgoings for the period:
Depreciation charged on PPE: $450,000
Political donations: $155,000
Staff parties: $3,200
Cost of updating assets: $10,000
Other expenses: $83,500
In Country M, there is a standard corporation tax of 12% charged on all corporation profits. What is Entity RH's total tax liability for this period?
Suggested Answer: A
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30 comments · newest first
AR
Art
17 days ago
I think the answer is B) $125,616. It fits after all deductions.
CO
Colby
23 days ago
True, but they’re disallowed, so we ignore them.
CR
Cristy
28 days ago
I feel like the political donations might throw us off too.
ST
Stephane
1 month ago
No, but we need to consider all the expenses correctly.
AR
Art
1 month ago
Right, then 12% tax on that gives us $132,000. But wait, is that an option?
CO
Colby
1 month ago
I calculated the taxable profit after disallowing expenses. I got $1.1 million.
CR
Cristy
2 months ago
Yeah, the depreciation really complicates the profit calculation.
ST
Stephane
2 months ago
I think the question is tricky with all those disallowed expenses.
AR
Art
2 months ago
I’m leaning towards option A. The calculations seem to fit.
BE
Bethanie
2 months ago
Right! Start with $1.5M, subtract depreciation and other disallowed expenses.
AD
Adolph
2 months ago
I think we need to adjust the taxable profit first.
TE
Tess
2 months ago
This question is tricky. Disallowed expenses really complicate things.
CH
Cherry
3 months ago
I’m leaning towards option A. The calculations seem to fit.
CU
Curtis
3 months ago
Right! Start with $1.5M, subtract depreciation and other disallowed expenses.
KY
Kyoko
3 months ago
I think we need to adjust the profit first.
EU
Eulah
3 months ago
This question is tricky with the disallowed expenses.
EM
Emogene
3 months ago
How do they even calculate that with all those expenses?
JA
Jame
4 months ago
Definitely going with option D!
TA
Tammara
5 months ago
Wait, are political donations really disallowed? That seems odd.
SO
Solange
5 months ago
I think the tax liability is around $252K.
SA
Sang
5 months ago
The taxable profit is $1.5M after disallowed expenses.
GE
Georgiann
6 months ago
I agree, but the total tax liability should be calculated carefully!
EM
Emerson
6 months ago
Isn't that a huge depreciation charge? Seems unfair!
LE
Lemuel
6 months ago
Wait, how can they disallow political donations?
SH
Shaquana
6 months ago
I think the tax liability is option B.
RA
Ranee
6 months ago
The taxable profit is $1.5M after disallowed expenses.
TH
Thersa
6 months ago
I believe the corporation tax is just 12% on the adjusted profit, but I can't recall the exact steps to calculate the total tax liability.
BE
Benedict
7 months ago
I'm not entirely sure if we should include the cost of updating assets in the taxable profit calculation. Was that considered a capital expense?
PO
Portia
7 months ago
I think we had a similar practice question where we had to calculate tax liabilities after adjusting for non-deductible expenses. It was tricky!
TH
Thaddeus
7 months ago
I remember we discussed how to adjust taxable profits by adding back disallowed expenses like depreciation and entertainment costs.