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

Actual exam question for CIMA's CIMAPRA19-F01-1 exam
Question #: 83
Topic #: 5
[All CIMAPRA19-F01-1 Questions]

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%.

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Suggested Answer: A

by Alease at Mar 20, 2024, 11:09 PM

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Craig
2 months ago
I wonder if the cafeteria at the tax office has free coffee. I'm going to need it to get through this question.
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Blair
12 days ago
D) $124,963
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Bernadine
14 days ago
C) $125,538
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Temeka
19 days ago
B) $114,463
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Lezlie
1 months ago
A) $115,038
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Tien
2 months 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!
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Viola
2 months 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.
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Ettie
26 days ago
User 4: Finally, we can compare the calculated tax charge with the given options to find the correct answer.
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Kristal
1 months ago
User 3: Then we can calculate the tax charge by applying the tax rate to the adjusted profit.
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Jennifer
1 months ago
User 2: So, first we need to calculate the adjusted profit by adding back the disallowed costs and subtracting the exempt income.
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Lindy
2 months ago
User 1: That does sound complicated. Let's break it down step by step.
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Ruthann
2 months 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.
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Micaela
2 months 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.
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Kenneth
2 months ago
Next, we should replace the accounting depreciation with the tax depreciation to calculate the tax charge.
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Lovetta
2 months ago
Let's start by adding back the entertaining costs and subtracting the exempt income from the accounting profit.
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Donette
2 months ago
I agree with Talia, the tax charge should be $114,463.
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Talia
3 months ago
I believe it should be $114,463 because tax depreciation is higher than accounting depreciation.
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Kaitlyn
3 months ago
I think the tax charge would be $115,038.
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