Test Your Understanding 2: Fatima Trading Company's Income Statement has shown RO 128,000 profit for the year 2021. Since the accountant of the company is new to Oman and not aware about all the rules of Law of Income Tax on Omani Companies. Indeed, he is not sure about the following transactions he has recorded in the company account books. 1. Company purchased patent worth RO 14000 in the year 2021. The life of patent is 14 years. The accountant expensed the cost of patent 2. The company accountant charged depreciation on the following assets cost at the rate 8% and 30% respectively: (i) Building cost RO40000 (ii) Equipment cost RO20000 The rate of depreciation on such assets as per taxation law of Oman recommended 4% and 33.33% respectively. 3. The opening inventory is undervalued by RO1500 and closing inventory is overvalued by RO12004. Bad debts of RO1500 recovered in the current year, which was written off in concerned previous year profit. This amount is not included in the profit given above. 5. The company had incurred an amount of RO23000 on inaugurating their business outlet. This amount is deducted in calculating the profit. However, the Secretariat General of income tax department declared RO4000 inappropriate because of non- availability of documentary evidence. 6. The company earned capital gain of RO2300 on disposal of securities listed in MSM. Such gain is included in the profit. 7. The company sustained the loss of RO1500 in the year 2017. This loss accountant carried forward and set - off from this year profit. Requirement: Calculate the taxable profit and the tax liability to be paid by the company.
Test Your Understanding 2: Fatima Trading Company's Income Statement has shown RO 128,000 profit for the year 2021. Since the accountant of the company is new to Oman and not aware about all the rules of Law of Income Tax on Omani Companies. Indeed, he is not sure about the following transactions he has recorded in the company account books. 1. Company purchased patent worth RO 14000 in the year 2021. The life of patent is 14 years. The accountant expensed the cost of patent 2. The company accountant charged depreciation on the following assets cost at the rate 8% and 30% respectively: (i) Building cost RO40000 (ii) Equipment cost RO20000 The rate of depreciation on such assets as per taxation law of Oman recommended 4% and 33.33% respectively. 3. The opening inventory is undervalued by RO1500 and closing inventory is overvalued by RO12004. Bad debts of RO1500 recovered in the current year, which was written off in concerned previous year profit. This amount is not included in the profit given above. 5. The company had incurred an amount of RO23000 on inaugurating their business outlet. This amount is deducted in calculating the profit. However, the Secretariat General of income tax department declared RO4000 inappropriate because of non- availability of documentary evidence. 6. The company earned capital gain of RO2300 on disposal of securities listed in MSM. Such gain is included in the profit. 7. The company sustained the loss of RO1500 in the year 2017. This loss accountant carried forward and set - off from this year profit. Requirement: Calculate the taxable profit and the tax liability to be paid by the company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Test Your Understanding 2: Fatima Trading Company's Income Statement has shown RO 128,000 profit for the year
2021. Since the accountant of the company is new to Oman and not aware about all the rules of Law of Income Tax on
Omani Companies. Indeed, he is not sure about the following transactions he has recorded in the company account
books. 1. Company purchased patent worth RO 14000 in the year 2021. The life of patent is 14 years. The accountant
expensed the cost of patent 2. The company accountant charged depreciation on the following assets cost at the rate
8% and 30% respectively: (i) Building cost RO40000 (ii) Equipment cost RO20000 The rate of depreciation on such assets
as per taxation law of Oman recommended 4% and 33.33% respectively. 3. The opening inventory is undervalued by
RO1500 and closing inventory is overvalued by RO12004. Bad debts of RO1500 recovered in the current year, which
was written off in concerned previous year profit. This amount is not included in the profit given above. 5. The company
had incurred an amount of RO23000 on inaugurating their business outlet. This amount is deducted in calculating the
profit. However, the Secretariat General of income tax department declared RO4000 inappropriate because of non-
availability of documentary evidence. 6. The company earned capital gain of RO2300 on disposal of securities listed in
MSM. Such gain is included in the profit. 7. The company sustained the loss of RO1500 in the year 2017. This loss
accountant carried forward and set - off from this year profit. Requirement: Calculate the taxable profit and the tax
liability to be paid by the company.
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