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CIMAPRA19-F01-1 Exam - Topic 5 Question 106 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam
Question #: 106
Topic #: 5
[All CIMAPRA19-F01-1 Questions]

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?

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Suggested Answer: B

by Graciela at Jan 22, 2025, 12:09 AM

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Abel
3 months ago
Totally agree, the calculations are straightforward!
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Verona
3 months ago
Wait, how can they have such high expenses and still make a profit?
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Precious
3 months ago
I think the tax liability is around $252,984.
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Coral
4 months ago
Don't forget, depreciation and entertaining expenses are disallowed!
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Shawnee
4 months ago
The taxable profit is $1.5 million, right?
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Leslee
4 months ago
I think the total taxable profit should be adjusted downwards by the disallowed expenses, but I'm unsure about the final tax calculation.
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Lonny
4 months ago
I feel like this question is similar to one we did in class about calculating tax liabilities, but I can't remember how we handled the disallowed expenses.
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Twila
4 months ago
I think the depreciation and entertainment expenses are the main ones we need to add back, but I can't recall the exact figures we practiced with.
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Solange
5 months ago
I remember we discussed how to adjust taxable profits by adding back disallowed expenses, but I'm not sure if I included all of them correctly.
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Pamella
5 months ago
This seems like a tricky one. I'll need to be really careful in identifying the disallowed expenses and making sure I apply the tax rate correctly. Gotta make sure I don't miss anything.
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Louisa
5 months ago
Okay, I think I've got this. I'll start by calculating the adjusted taxable profit by adding back the disallowed expenses, then apply the 12% tax rate. Should be a pretty quick calculation.
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Tegan
5 months ago
Hmm, I'm a bit unsure about how to handle the different expense items. Are political donations and staff parties both disallowed expenses in Country M? I'll need to double-check the instructions.
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Lyndia
5 months ago
This looks like a straightforward tax calculation question. I'll need to adjust the taxable profit by adding back the disallowed expenses and then apply the 12% tax rate.
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Monroe
9 months ago
Wait, are we sure the political donations are disallowed? Maybe they're considered a legitimate business expense in Country M. I'd better double-check the local tax laws. This is why I should have taken that Accounting 101 class in college. *sigh*
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Dick
10 months ago
This is a tricky one, but I think I've got it. The key is to remember that disallowed expenses are added back to the taxable profit. So, the answer is definitely A) $234,384. Now, where's the nearest coffee shop? I need a break after all this tax math.
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Darell
8 months ago
Sounds like a plan! I could use a break after all that tax math.
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Casie
8 months ago
Let's celebrate getting the answer right! How about we grab a coffee at the nearest coffee shop?
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Twana
8 months ago
I agree, the answer is definitely A) $234,384. Disallowed expenses are added back to the taxable profit.
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Leota
10 months ago
Hmm, I'm not sure about the political donations. Aren't those sometimes tax-deductible? I'll have to look into that. But the rest of the calculations seem correct, so I'm leaning towards A) $234,384.
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Brittani
8 months ago
Yes, I believe the correct answer is A) $234,384.
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Hyman
9 months ago
I agree, I also think the total tax liability is $234,384.
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Ty
9 months ago
I think political donations are usually not tax-deductible.
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Brinda
10 months ago
Wait, what about the political donations and staff parties? Those are also disallowed expenses, right? I'm going to double-check the numbers, but I think the answer might be C) $254,184.
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Cordell
8 months ago
Great job on catching that detail! The correct answer is C) $254,184.
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Leana
9 months ago
After adding back the disallowed expenses, the total tax liability for Entity RH is indeed C) $254,184.
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Annalee
9 months ago
So, we need to add those amounts back to the taxable profit before calculating the tax liability.
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Brice
10 months ago
Yes, you are correct. Political donations and staff parties are disallowed expenses in Country M.
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Eric
10 months ago
Okay, let's break this down. Depreciation and entertaining expenses are disallowed, so we need to add those back to the taxable profit. The rest seems straightforward, so I think the answer is A) $234,384.
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Donette
10 months ago
I'm not sure, but I think we need to consider the disallowed expenses and calculate the tax liability accordingly. I would go with A) $234,384 as well.
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Maybelle
11 months ago
I agree with Cecily, because the total tax liability should be calculated based on the taxable profit and the standard corporation tax rate.
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Cecily
11 months ago
I think the answer is A) $234,384.
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