Question
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.
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:
A. Calculate the Income Tax Payable for Parach Services for 2018.
B. Calculate the effective tax rate.
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