ICAN NOVEMBER 2023 MOCK EXAMINATIONS

TAXATION

FIRST CHOICE ACCURATE (FCA) SUCCESS LINK INC.

Accounting & Finance Resource Centre
 TAX - FCA

FIRST CHOICE ACCURATE (FCA) SUCCESS LINK INC.

SKILLS LEVEL MOCK EXAMINATION – NOVEMBER 2023
TAXATION
Time Allowed: 31/4 hours (including 15 minutes reading time)

INSTRUCTION:
You are required to answer five out of seven questions in this paper.

SECTION A: Compulsory question (30 marks)

Question 1 (Total: 30 marks)

SECTION B: You are required to answer any two out of three questions in this
section (40 marks)

Question 2 (Total: 20 marks)

Question 3 (Total: 20 marks)

Question 4 (Total: 20 marks)

SECTION C: You are required to answer any two out of three questions in this
section (30 marks)

Question 5 (Total: 15 marks)

Question 6 (Total: 15 marks)

Question 7 (Total: 15 marks)

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SECTION A: COMPULSORY QUESTION (30 MARKS)

QUESTION 1
Messi-Ronaldo Limited commenced business as a trading company on April 1,
2023. The results of the company for the first few years of commencement of
business were as follows:
N
Period to September 30, 2023, 3,359,060
Year to September 30, 2024, 23,908,620
Year to September 30, 2025, 32,565,940
Year to September 30, 2026, 22,565,940
Year to September 30, 2027, 15,454,389

The company acquired the following qualifying capital expenditure:

Date Description of qualifying capital expenditure Cost (N)
01/02/2023 Industrial Buildings 12,000,760
01/04/2023 Plant & Machinery 1 4,990,000
04/07/2024 Furniture & Fittings 2,400,000
07/07/2025 Pant & Machinery 2 10,000,000
10/07/2025 Motor Vehicle 5,000,000

The industrial building was sold on August 4, 2025, for N18,000,000.

Required:
a. Compute the capital allowance claimable by the company for all the relevant
years of assessment.
b. Compute the balancing charge/allowance (if any).
c. Compute the tax liability payable by the company for the relevant years of
assessment.
d. If the company is a manufacturing company and not a trading company, will
your answer be different from what you have in part (c) above? (30 marks)

SECTION B: YOU ARE REQUIRED TO ANSWER ANY TWO OUT OF THREE

QUESTIONS IN THIS SECTION (40 MARKS)

QUESTION 2
Modi Telecommunications Limited is a company based in Bologna, Italy with a
representative office in Nigeria. Its main business is in the area of private
communication which is carried out over the world.

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The following data were obtained for the 75 million minutes recorded worldwide
during the year ended 31st December 2022.

Italy to the rest of Europe 29,900,000 minutes

Italy to the Americas 15,750,000 minutes
Italy to the rest of Africa 6,750,000 minutes
Italy to Nigeria 10,600,000 minutes
Nigeria to Italy 8,800,000 minutes
Nigeria to the rest of the world 3,200,000 minutes

The following additional information were provided:

N
Salaries and personnel cost 57,840,000
Licenses and other operational costs 157,910,000
Repairs and maintenance 20,500,000
Depreciation of fixed assets 134,000,000
General provision for doubtful debts at 2% of turnover
Income tax provision 45,000,000

Calls are made at the rate of 5 Lira for every 3 minutes. It was agreed that the rate of
exchange shall be N4 for every Lira.

Required:
a. Compute the income tax payable on Nigerian operation for the relevant tax
year.

b. How would your computation be affected if you were informed that Nigerian
assessable profit should be taken as 22.5% of turnover, and that the capital
allowance is 35% of the depreciation charged in the accounts? (20 marks)

QUESTION 3
Oludemi, Chukwudi, and Abdulahi are partners in the firm, Oludemi & Co. for a
very long time. The firm makes up accounts up to 30th June every year. Below are
the extracts from the profit and loss account for the year ended 30th June 2022.
N’000 N’000
Net profit for the year 1,200,000
After charging:
Repairs and maintenance 150,000
Rent 120,000
Interest on loan and overdraft 65,000
Interest on capital 117,500
Salaries 210,000
Loss on the sale of fixed assets 48,000
Legal expenses for a successful defense of tax matters 105,000

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Other information are as follows:

a. Salaries were paid for partner as follows: N’000
Oludemi: 90,000
Chukwudi 70,000
Abdulahi 50,000

b. Each of the partner is married with six children. All their children are still of school
age.

c. Oludemi and Abdulahi made loans to the partnership, interest on which was paid
as follows: N’000
Oludemi: 30,000
Abdulahi 35,000

d. Each of the partners has an aged parent whom they maintained during the
accounting year.

e. The partners have insurance policies on their lives and the premiums for the
current year are:
N’000
Oludemi: 30,000
Chukwudi 32,000
Abdulahi 25,000

f. The partners are entitled to 5% on capital contributed by them. The balance on

their Capital Accounts are as follows:
N’000
Oludemi: 900,000
Chukwudi 700,000
Abdulahi 750,000

g. Included in the “repairs and maintenance” is the sum of N45,000,000 which was
spent on the repairs of Oludemi’s mother’s house.

h. Capital allowance and balancing allowance were

N’000
Capital Allowance: 120,000
Balancing Allowance 80,000

i. Partners share profit in the following ratio:

Oludemi: 3
Chukwudi 2
Abdulahi 1

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You are required to:

Calculate the taxable income and the tax payable by each partner for the 2023 year
of assessment. (20 marks)

QUESTION 4
ChrisTola Ltd is a Nigerian company which has been in business for several years.
The summary of the company’s account for the year ended 30th November 2022 is
as follows:
N N
Gross Profit 1,200,000
Dividend received from other companies 70,000
Profit from the sale of fixed assets 64,000
Rent received (gross) ___56,000
1,390,000
Less: Expenses
Rent 80,000
Salaries and wages 400,000
Light and electricity 15,000
Travelling expenses 20,000
Rates 15,000
Repairs to properties 60,000
Depreciation 50,000
Bad debt 20,000
Income tax provision 65,000
Postages and telephone 25,000
Stationeries 12,000
Legal expenses 80,000
General expenses 28,000
Expansion to cold room 200,000 1,070,000
Net profit 320,000

The following additional information is available:

i. Bad debt includes N10,000 general provisions written off on sales of trade
stock.
ii. General expenses include: N
Repairs to cold room 13,500
Chief Executive’s private use of official car 6,000
Fine on Chief Executive for traffic offence 4,000
Fine on employees for traffic offence 2,000
Trade magazines _2,500
28,000

iii. Travelling expenses include Chief Executive private holiday hotel bill for
N5,000.
iv. Legal expenses include N10,000 for negotiation for a building, a property
which the company intends to buy in nearest future.
v. Capital allowance for 2023 assessment year is N90,000

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vi. Withholding tax at 10% was deducted at source from investment income.

You are required to: Compute the company’s income liability for the relevant year
of assessment.

SECTION C: YOU ARE REQUIRED TO ANSWER ANY TWO OUT OF THREE

QUESTIONS IN THIS SECTION (30 MARKS)

QUESTION 5
Mr. Nurudeen Alowonle carries on a business in the name of Nurudeen Nigeria
Enterprises. The following transactions were received in his book for the year 2023.
Date Transactions Amount
29/01/2023 Contract of supply from NNPC (net) 665,000

10/02/2023 Sold one of his houses in Abuja to Biola Ltd (gross) 10,200,000
02/03/2023 Consultancy and professional fees received from individual clients (gross) 400,000

05/06/2023 Received various dividends (net) 50,400

31/07/2023 Received rent from Saheed Ltd on his property in Victoria Island (net) 1,170,000
08/09/2023 Rent received from various individual tenants (gross) 240,000

The contract of supply was duly executed, and payment received. All tax agents performed
their obligations be deducting all government taxes/levies and remitted same accordingly.
Withholding tax rate of 5% was applied to the contract of supply, consultancy, and
professional fees. All others attract 10%.
Required:
a. Compute the withholding tax paid by Mr. Nurudeen Alowonle in the year 2023.
b. What is the actual net amount that was received by Mr. Nurudeen Alowonle in
the year 2023 if everyone deducted and remitted the withholding tax charged
on the various transactions? (15 marks)

QUESTION 6
Christopher Construction Ltd has engaged in building construction for many
years. They appointed you as a consultant to enable them to understand the trust of
VAT particularly as it affects them. They have made the following records available
to you for the month of August 2023.

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Date Details Amount (N’000)

01/08/2023 Bought a concrete mixer 500,000
03/08/2023 Scaffolding pipes 1,500
04/08/2023 Bought chippings 50,000
05/08/2023 Bought packer vibrator 350,000
06/08/2023 Bought a truck load of sand 50,000
07/08/2023 Bought a tipper load of gravel 70,000
08/08/2023 Bought Sharp photocopiers 50,000
09/08/2023 Bought executive tables 15,000
10/08/2023 Bought office chairs 2,000

Additional Information:
i. On 04/06/2023 the company negotiated a contract for N5,000,000,000 and
received the sum of N2,5000,000,000 on 04/08/2023 as part payment on the
contract.

ii. On 05/06/2023 another labour contracted was entered into by the company for
N500,000,000. Payment of N260,000,000 was received 05/08/2023.

iii. VAT was paid on all purchases made by the company.

Required:
a. Compute the VAT payable, if any, for the month of August 2023 and state when
and in what manner the payments should be made.

b. Itemize the contents of a Notice of Appeal against VAT Assessments.

c. What are the differences between VAT and Withholding Tax? (15 marks)

QUESTION 7
Write short notes on the following:
i. Self-assessment and Best-of-judgment assessment
ii. Normal basis period and abnormal basis period
iii. Tax assessments that are final and conclusive (15 marks)

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