A. For the year ended December 31, 2018, Parach Services Ltd. a haulage company has a profit before tax of $77 million after charging/crediting the following. Donations to University of the West Indies 950,000 Bad Debts 3,500,000 Foreign Travel 1,500,000 Interest Income (5,000,000) Depreciation 1,720,000 Legal Fees 4,500,000 Audit Fees 2,400,000 Additional Information: i. Bad debts include advances to staff who is no longer with the company $560,000; Estimated bad debt $1,650,000 and debtors totalling $1,290,000. ii. Foreign Travel includes $740,000 for the Financial Controller's family iii. Legal fees include court cases related to collecting bad debt $2,000,000 and the balance related to defending a GCT matter iv. Interest Payable at 31" December 2017 was $1,500,000 and at the end of the current year it was $1,150,000 v. Gross Interest of $2,600,000 receivable at 31* December 2017 was received in 2018 and at the end of the current year interest receivable is $8 million vi. Capital allowances are as follows 1. Initial allowance $1,000,000 2. Annual allowance $2,960,000 3. Balancing allowance $1,500,000 4. Balancing charge $ 290,000 vii. Parach paid estimated taxes for 2018 in the amount of $2,780,000 viii. Tax deducted at source from interest income during the year was $1,000,000 Required: Calculate the Income Tax Payable for Parach Services for 2018. (18 marks) Calculate the effective tax rate (2 marks) (Total 20 marks) B. A. For the year ended December 31, 2018, Parach Services Ltd. a haulage company has a profit before tax of $77 million after charging/crediting the following. Donations to University of the West Indies 950,000 Bad Debts 3,500,000 Foreign Travel 1,500,000 Interest Income (5,000,000) Depreciation 1,720,000 Legal Fees 4,500,000 Audit Fees 2,400,000 Additional Information: i. Bad debts include advances to staff who is no longer with the company $560,000; Estimated bad debt $1,650,000 and debtors totalling $1,290,000. ii. Foreign Travel includes $740,000 for the Financial Controller's family iii. Legal fees include court cases related to collecting bad debt $2,000,000 and the balance related to defending a GCT matter iv. Interest Payable at 31" December 2017 was $1,500,000 and at the end of the current year it was $1,150,000 v. Gross Interest of $2,600,000 receivable at 31* December 2017 was received in 2018 and at the end of the current year interest receivable is $8 million vi. Capital allowances are as follows 1. Initial allowance $1,000,000 2. Annual allowance $2,960,000 3. Balancing allowance $1,500,000 4. Balancing charge $ 290,000 vii. Parach paid estimated taxes for 2018 in the amount of $2,780,000 viii. Tax deducted at source from interest income during the year was $1,000,000 Required: Calculate the Income Tax Payable for Parach Services for 2018. (18 marks) Calculate the effective tax rate (2 marks) (Total 20 marks) B
