NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
APRIL/MAY 2019 EXAMINATION

COURSE CODE: ACC318                                           

CREDIT UNIT: 3               

COURSE TITLE: TAXATION II

TIME ALLOWED: 21/2HRS

INSTRUCTIONS:

1. Attempt Question One (1) and any other three (3) questions

2. Question 1 carries 25 marks, while the other questions carry 15 marks each.

3. Present all points in coherent and orderly manner

QUESTION 1

a) Pink, Blue and Purple have been in partnership as Estate consultants for many years. The following results were extracted from their records for the year ended 31st December, 2018

                                                                N‘000                        N‘000

Gross Profit                                                                               105,000

Salaries & Wages:

                 Pink                                         8,000

                 Purple                                       6,000

Consultancy fees                                     12,000

Provision for bad debts- specific              8,200

Depreciation                                            10,400

Interest on loan                                          3,500

Office Expenses                                        8,500

Interest on capital:

                  Pink                       6,200

                  Blue                       8,000

                 Purple                     3,000        (73,800)

Net Profit                                                  31,200

Additional information is as follows:           

(1) Capital allowances have been agreed at ₦12,000,000

(ii) Consultancy services were rendered by Blue

(iii) Interest on loan was paid to Purple having provided the firm with facility

(iv) Profit and losses are shared in the ratio 2:2:1

You required to compute:

   a) (i) the distributable profit of the partnership (6M arks)

   a) (ii) and the taxable income of the partners for the relevant year of assessment. (9 Marks)

b) Explain the term partnership (2 Marks)

c)  Discuss the two (2) types of partnership (5 Marks)

d)  Elucidate three (3) non-taxable income of a partnership (3 Marks)

(Total 25 Marks)

QUESTION 2

a) Give five (5) differences between a trade and profession (5 Marks)

b) On 1st January 2018, Ruby Gold was employed by Cocopops Limited as the company secretary, on a salary of ₦60,000,000 per annum. Ruby Gold is married with five children.

The following information was also provided at the end of her first year in Cocopops Limited:

i) The company provides Ruby Gold with an official car with a market value of ₦15,000,000

ii) The company pays ₦7,500,000 per annum on her official accommodation

iii) Ruby Gold has a life assurance policy with Effective Assurance PLC. The sum assured is ₦80,000,000, while premium paid in 2018   is ₦6,000,000

iv) She contributed ₦400,000 monthly to an approved pension scheme.

v) She spent ₦75,000 during the year for the upkeep of her two aged parents who h…