Discuss CIMA CIMAPRA19-F01-1 Exam Topic 5 Question 83

RST operates in Country X where the tax rules state entertaining costs and accounting depreciation are disallowable for tax purposes.

In year ending 31 May 20X4, XYZ made an accounting profit of $480,000.

Profit included $16,300 of entertaining costs and $15,150 of income exempt from taxation.

XYZ has plant and machinery with accounting depreciation amounting to $24,200 and tax depreciation amounting to $45,200.

Calculate the tax charge for the year ended 31 May 20X4 assuming all profits are taxed at 25%.

A$115,038

B$114,463

C$125,538

D$124,963

Suggested Answer: A

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35 comments · newest first

Beckie 11 months ago

I think the tax charge is closer to option B.

Mabel 11 months ago

I thought all expenses could be deducted, this is surprising!

Breana 11 months ago

Wait, how does the depreciation affect the tax charge?

Verdell 12 months ago

Totally agree, that changes the profit calculation!

Alberta 12 months ago

Entertaining costs are disallowed for tax, right?

Junita 1 year ago

I think the tax charge is based on the adjusted profit after considering the disallowable expenses, but I’m a bit confused about how to handle the depreciation differences.

Desmond 1 year ago

This question feels similar to the practice one we did on tax adjustments, where we had to exclude non-taxable income. I hope I remember the calculations correctly!

Nan 1 year ago

I think we need to add back the entertaining costs and adjust for the different depreciation amounts, but I can't recall the exact steps.

Harrison 1 year ago

I remember we discussed how to adjust the accounting profit for tax purposes, but I'm not sure about the exact treatment of exempt income.

Jolene 1 year ago

This is straightforward enough. I'll just need to make the necessary adjustments to the accounting profit, apply the 25% tax rate, and I should have the right answer.

Lavonne 1 year ago

Wait, what's the difference between accounting and tax depreciation again? I need to make sure I'm adjusting that correctly. Better double-check the details on that.

Caitlin 1 year ago

Okay, I think I've got this. I'll start by adding back the entertaining costs and subtracting the exempt income from the accounting profit. Then I'll adjust for the difference between accounting and tax depreciation. Should be a fairly simple calculation from there.

Micheline 1 year ago

Hmm, I'm a bit unsure about how to handle the disallowable expenses and exempt income. I'll need to review the tax rules carefully to make sure I don't miss anything.

Kristeen 1 year ago

This looks like a straightforward tax calculation question. I'll need to make some adjustments to the accounting profit to arrive at the taxable profit.

Mariann 1 year ago

I'm a bit confused here. Does Marcela need to be able to create journals as well? Or is it just approving and posting that she can do? I want to make sure I select the right combination of roles.

Brandon 1 year ago

I think the trade-off between transportation costs and inventory carrying costs seems critical, but I'm not entirely sure. We talked about this in class, how too much inventory can tie up cash.

Edgar 1 year ago

Hmm, I'm a little unsure about this one. I know communication with executives is important, but I'm not sure which specific objectives they would care about the most. I'll have to think this through carefully.

Craig 1 year ago

I wonder if the cafeteria at the tax office has free coffee. I'm going to need it to get through this question.

Blair 1 year ago

↳ replying to Craig

D) $124,963

Bernadine 1 year ago

↳ replying to Craig

C) $125,538

Temeka 1 year ago

↳ replying to Craig

B) $114,463

Lezlie 1 year ago

↳ replying to Craig

A) $115,038

Tien 1 year ago

Ah, classic tax question. Let's see, add back the entertaining costs, subtract the exempt income, and use the tax depreciation. Easy peasy, lemon squeezy!

Viola 2 years ago

Wait, what? Disallowed entertaining costs and tax depreciation? This sounds like some kind of sorcery. I'll need to really focus on this one.

Ettie 1 year ago

↳ replying to Viola

User 4: Finally, we can compare the calculated tax charge with the given options to find the correct answer.

Kristal 1 year ago

↳ replying to Viola

User 3: Then we can calculate the tax charge by applying the tax rate to the adjusted profit.

Jennifer 1 year ago

↳ replying to Viola

User 2: So, first we need to calculate the adjusted profit by adding back the disallowed costs and subtracting the exempt income.

Lindy 1 year ago

↳ replying to Viola

User 1: That does sound complicated. Let's break it down step by step.

Ruthann 2 years ago

Hmm, I think the key here is to properly adjust the accounting profit to arrive at the taxable profit. This seems straightforward, but I better double-check my calculations.

Micaela 2 years ago

Okay, so we have to adjust the accounting profit by adding back the disallowed entertaining costs and subtracting the exempt income. Then, we need to use the tax depreciation instead of the accounting depreciation. Let me work this out.

Kenneth 1 year ago

↳ replying to Micaela

Next, we should replace the accounting depreciation with the tax depreciation to calculate the tax charge.

Lovetta 1 year ago

↳ replying to Micaela

Let's start by adding back the entertaining costs and subtracting the exempt income from the accounting profit.

Donette 2 years ago

I agree with Talia, the tax charge should be $114,463.

Talia 2 years ago

I believe it should be $114,463 because tax depreciation is higher than accounting depreciation.

Kaitlyn 2 years ago

I think the tax charge would be $115,038.

CIMAPRA19-F01-1 Exam - Topic 5 Question 83 Discussion