Corporation Tax Computation Omera Electrical Industries Ltd for the 12 Months ended 31 December 201X Income Statement Notes Turnover Cost of Sales Gross Profit Other Income Rent Interest 6,500,000 2,925,000 3,575,000 60,000 20,000 80,000 3,655,000 Expenses Director's Fees Salaries Wages 360,000 1,240,000 520,000 150,800 Loss on Disposal of Plant & Equipment Vehicle Expenses Insurance Aircondition Building Maintenance 10,000 52,000 84.000 24,000 72,000 250,000 70,000 Marketing and Promotions 122 MGMT3051 Taxation 7,200 80,000 Subscriptions&Membership Professional Fees Bad Debt Expenses Telephones Electricity Utilities Bank charges Entertainment Donations Net Profit Before Tax 3 4 32,000 84,000 12,000 2,400 7,200 50,000 6 3,167,600 487,400 Notes to the Income Statement 1. The depreciation policy of the company is to use rates of depreciation in keeping with the nature of the machinery it uses. The actual Wear and Tear allowance for tax purposes this year is much greater, equal to $420,000 Marketing and Promotional Expenses-$50,000 of the total was incurred in participating in a trade fare in an overseas market. The government is giving an incentive this year to facilitate the growth in export markets by allowing the deduction of 150% of this type of expense for tax purposes. 2. 3. Professional Fees This includes legal fees of $ 40,000 incurred in defending a legal action brought against the company for infringement of patent rights by a competitor in the industry 4. Bad Debt Expenses- This amount is made up of write off $25,000 for debt now considered unrecoverable as the customer has gone into liquidation. The balance is a general provision made on the basis of past experience that a small percentage of customers fail to honor their debts. 5. Entertainment expenses were solely for the purpose of promoting the business to its corporate clients 6. Donations include an amount of $10,000 to cultural activities and $10,000 to sports clubs. The government is also giving an incentive so as to promote social and cultural a-wareness and responsibility by business persons and allows 150% of these expenses as tax deductible up to a limit of $1,000,000. Questions Required: 1. Compute the Corporation Tax Liability the Omera Electrical Industries Ltd. for the Financial Year just ended, given a Corporation Tax Rate of 25% Define the tollowing: 2. .L What is a close company? Corporation Tax Computation Omera Electrical Industries Ltd for the 12 Months ended 31 December 201X Income Statement Notes Turnover Cost of Sales Gross Profit Other Income Rent Interest 6,500,000 2,925,000 3,575,000 60,000 20,000 80,000 3,655,000 Expenses Director's Fees Salaries Wages 360,000 1,240,000 520,000 150,800 Loss on Disposal of Plant & Equipment Vehicle Expenses Insurance Aircondition Building Maintenance 10,000 52,000 84.000 24,000 72,000 250,000 70,000 Marketing and Promotions 122 MGMT3051 Taxation 7,200 80,000 Subscriptions&Membership Professional Fees Bad Debt Expenses Telephones Electricity Utilities Bank charges Entertainment Donations Net Profit Before Tax 3 4 32,000 84,000 12,000 2,400 7,200 50,000 6 3,167,600 487,400 Notes to the Income Statement 1. The depreciation policy of the company is to use rates of depreciation in keeping with the nature of the machinery it uses. The actual Wear and Tear allowance for tax purposes this year is much greater, equal to $420,000 Marketing and Promotional Expenses-$50,000 of the total was incurred in participating in a trade fare in an overseas market. The government is giving an incentive this year to facilitate the growth in export markets by allowing the deduction of 150% of this type of expense for tax purposes. 2. 3. Professional Fees This includes legal fees of $ 40,000 incurred in defending a legal action brought against the company for infringement of patent rights by a competitor in the industry 4. Bad Debt Expenses- This amount is made up of write off $25,000 for debt now considered unrecoverable as the customer has gone into liquidation. The balance is a general provision made on the basis of past experience that a small percentage of customers fail to honor their debts. 5. Entertainment expenses were solely for the purpose of promoting the business to its corporate clients 6. Donations include an amount of $10,000 to cultural activities and $10,000 to sports clubs. The government is also giving an incentive so as to promote social and cultural a-wareness and responsibility by business persons and allows 150% of these expenses as tax deductible up to a limit of $1,000,000. Questions Required: 1. Compute the Corporation Tax Liability the Omera Electrical Industries Ltd. for the Financial Year just ended, given a Corporation Tax Rate of 25% Define the tollowing: 2. .L What is a close company