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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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This is about tax in the Caribbean can you help please.

iii. Calculate the Corporation Tax Liability of Full  Co. for Y/A: 20212. Using the Barbados Income Tax Act or any other relevant document explain the treatment of the
items included or omitted from the income tax computation.

Part A Full Tax Co. is incorporated and tax resident in Barbados. The audited financial statements for Full Tax Co. for year-end December 31, 2022, show an accounting profit after tax of $5,500,000 after charging the following: • Depreciation $1,500,000 • Tax for the year $500,000 • Property Tax $900,000 • Interest expense $15,000 • Preference dividends of $40,000 • Legal fees $1,110,000 • Insurance of $750,000 • Bad debts $40,000 • Foreign Travel $20,000 • Repairs and Maintenance $1,500,000 • General expenses $600,000 Other Information 1. Property Tax of $600,000 was paid for the property on which the company's factory is located; $300,000 for the office premises and $100,000 for the director's home. 2. The insurance was paid for the factory and office premises. 3. The bad debt expense includes a general provision of $10,000 and a specific provision of $30,000. 4. The company paid interim ordinarily dividends totaling $100,000. 5. Repairs and Maintenance include for $500,000 removing the office ceramic floor titles and replacing it with wooden flooring. 6. Included in the company's total assessable income is exempt income of $50,000. $16,500 relates to expenses incurred in earning this exempt income. 7. Legal fees include: - $40,0000 in respect of recovery of commercial debts for Full Tax Co. - $10,000 in respect of recovery of commercial debts for Half Tax Co. The company was reimbursed this amount.
Transcribed Image Text:Part A Full Tax Co. is incorporated and tax resident in Barbados. The audited financial statements for Full Tax Co. for year-end December 31, 2022, show an accounting profit after tax of $5,500,000 after charging the following: • Depreciation $1,500,000 • Tax for the year $500,000 • Property Tax $900,000 • Interest expense $15,000 • Preference dividends of $40,000 • Legal fees $1,110,000 • Insurance of $750,000 • Bad debts $40,000 • Foreign Travel $20,000 • Repairs and Maintenance $1,500,000 • General expenses $600,000 Other Information 1. Property Tax of $600,000 was paid for the property on which the company's factory is located; $300,000 for the office premises and $100,000 for the director's home. 2. The insurance was paid for the factory and office premises. 3. The bad debt expense includes a general provision of $10,000 and a specific provision of $30,000. 4. The company paid interim ordinarily dividends totaling $100,000. 5. Repairs and Maintenance include for $500,000 removing the office ceramic floor titles and replacing it with wooden flooring. 6. Included in the company's total assessable income is exempt income of $50,000. $16,500 relates to expenses incurred in earning this exempt income. 7. Legal fees include: - $40,0000 in respect of recovery of commercial debts for Full Tax Co. - $10,000 in respect of recovery of commercial debts for Half Tax Co. The company was reimbursed this amount.
- $15,000 in respect of recovery of commercial debts for One-Third Tax Co. The company was not reimbursed this amount. - $50,000 relating to the purchase of new subsidiary - $400,000 to increase the share capital of the company 8. General expenses include $72,000 for the school fees of the director's son. 9. The capital allowances have been calculated at $130,550. Based on the items included in the fixed asset schedule. 10. There was an increase in wages of $1,000,000 which qualifies for Employment Tax Credit (all other conditions to qualify for this credit was met). 11. The tax rates for general Barbados is as follows: Corporate income tax (CIT) rates The following rates apply to taxes on corporate income: Taxable income bracket/ Entity Taxable income up to 1 million Barbados dollars (BBD) Taxable income exceeding BBD 1 million but not exceeding BBD 20 million Taxable income exceeding BBD 20 million but not exceeding BBD 30 million Taxable income exceeding BBD 30 million 2013 $300,000 2015 $5,000,000 CIT rate (%) Required i. 5.5 - 3.0 12. Assume capital allowance rate of 5 % p. A for building/ leasehold improvements. 13. All amounts are in Barbadian currency. 14. As at the 31 December 2020, the company has prior year's tax losses as follows: 2.5 1.0 2020 $4,000,000 Tax losses can be carried forward for a maximum of 7 years and is restricted to 50% of the tax income in the current year. Explain the difference between tax reliefs and tax credits. Giving at two examples for each that maybe found in Jamaica, Trinidad and Tobago or Barbados ii. How would you classify the tax system in Barbados.? State your reason iii. Calculate the Corporation Tax Liability of Full Tax Co. for Y/A: 20212. Using the Barbados Income Tax Act or any other relevant document explain the treatment of the items included or omitted from the income tax computation. iv. Explain two reasons why expenses may not be deductible for income tax/corporation tax purposes. v. Identify two (2) documents that must accompany the Corporation Tax return when it is filed.
Transcribed Image Text:- $15,000 in respect of recovery of commercial debts for One-Third Tax Co. The company was not reimbursed this amount. - $50,000 relating to the purchase of new subsidiary - $400,000 to increase the share capital of the company 8. General expenses include $72,000 for the school fees of the director's son. 9. The capital allowances have been calculated at $130,550. Based on the items included in the fixed asset schedule. 10. There was an increase in wages of $1,000,000 which qualifies for Employment Tax Credit (all other conditions to qualify for this credit was met). 11. The tax rates for general Barbados is as follows: Corporate income tax (CIT) rates The following rates apply to taxes on corporate income: Taxable income bracket/ Entity Taxable income up to 1 million Barbados dollars (BBD) Taxable income exceeding BBD 1 million but not exceeding BBD 20 million Taxable income exceeding BBD 20 million but not exceeding BBD 30 million Taxable income exceeding BBD 30 million 2013 $300,000 2015 $5,000,000 CIT rate (%) Required i. 5.5 - 3.0 12. Assume capital allowance rate of 5 % p. A for building/ leasehold improvements. 13. All amounts are in Barbadian currency. 14. As at the 31 December 2020, the company has prior year's tax losses as follows: 2.5 1.0 2020 $4,000,000 Tax losses can be carried forward for a maximum of 7 years and is restricted to 50% of the tax income in the current year. Explain the difference between tax reliefs and tax credits. Giving at two examples for each that maybe found in Jamaica, Trinidad and Tobago or Barbados ii. How would you classify the tax system in Barbados.? State your reason iii. Calculate the Corporation Tax Liability of Full Tax Co. for Y/A: 20212. Using the Barbados Income Tax Act or any other relevant document explain the treatment of the items included or omitted from the income tax computation. iv. Explain two reasons why expenses may not be deductible for income tax/corporation tax purposes. v. Identify two (2) documents that must accompany the Corporation Tax return when it is filed.
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