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 Controllers 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 31st 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 31st 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) B. Calculate the effective tax rate (2 marks) (Total 20 marks)

END OF SECTION A

SECTION B Instruction: Complete ALL questions from this section.

Question 1 For year ended 2014 December 31, Jamjar Limited, a fruit preserving company, has a profit before tax of $50M after charging/ the following:

Depreciation Interest expense Legal fees Audit fees Interest income Foreign travel Bad debts Donations

$ 960 000 4 800 000 3 600 000 2 400 000 <6 600 000> 1 400 000 2 520 000 800 000

Additional information: i. Legal fees are as follows:

Expenses relating to an increase in share capital - $1 200 000 Expenses in respect of the recovery of debts - $1 000 000 Expenses relating to defence of a tax (GCT) matter - $1 400 000

ii. Bad debts of advances totalling $600 000 to a salesman who had left Jamjar, Rocky Limited, a debtor for $340 000 and $1 580 000 being a percentage of sales deemed to be bad iii. Included in revenue is dividend income received after 2013 April 01 (net of 15% tax deducted) of $20 000 and a refund of income tax of $900 000 in respect of 2007 iv. Interest payable at 2013 December 31 was $1 400 000 and at the end of the current year, 2014, is $1 120 000 v. Gross interest of $1 600 000 receivable at 2013 December 31 was received in 2014 and at the end of the current year interest receivable is $3.4M vi. Net profit on the disposal of fixed assets during the year was $300 000 and is included in income vii. Capital allowances are as follows: Initial allowance $ 360 000 Annual allowance $1 880 000 Balancing allowance $ 300 000 Balancing charge $ 240 000 viii. Jamjar paid an estimated tax of $3.6M during 2014 ix. Tax deducted at source from interest income during the year was $1 140 000 x. The company has a tax loss brought forward of $24.56M xi. Included in foreign travel is $620 000 for the managing directors family.

Required Compute the income tax liability for Jamjar Limited for the year of assessment, 2014, with notes, including case laws and the relevant sections of the Income Tax Act of Jamaica, where applicable.