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

Actual exam question for CIMA's CIMAPRA19-F01-1 exam

Question #: 106
Topic #: 5

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?

A$234,384

B$125,616

C$254,184

D$252,984

Show Suggested Answer

Suggested Answer: B

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

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Monroe

3 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

3 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

2 months ago

Sounds like a plan! I could use a break after all that tax math.

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Casie

2 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

2 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

3 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

2 months ago

Yes, I believe the correct answer is A) $234,384.

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Hyman

3 months ago

I agree, I also think the total tax liability is $234,384.

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Ty

3 months ago

I think political donations are usually not tax-deductible.

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Brinda

4 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

2 months ago

Great job on catching that detail! The correct answer is C) $254,184.

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Leana

2 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

3 months ago

So, we need to add those amounts back to the taxable profit before calculating the tax liability.

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Brice

4 months ago

Yes, you are correct. Political donations and staff parties are disallowed expenses in Country M.

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Eric

4 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

4 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

4 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

4 months ago

I think the answer is A) $234,384.

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