Page 19 - CIMA MCS Workbook August 2018 - Day 2 Suggested Solution

SUGGESTED SOLUTIONS

Taxes paid to other public bodies.

If taxes paid to other bodied were an allowable expense then this would result in the company being
able to effectively claim back 20% of the tax paid by reducing its corporate tax profits.
There is no point in one part of the government charging a business tax only for another part of the
government to give it back.
Conclusion

If you adjust the accounting profit from last year for the depreciation and tax depreciation allowance
and then for any other non-allowable expenses you should then arrive at the taxable profit that the
auditor used to calculate last year’s tax paid of C$1,065,000 per the statement of cash flows. If this
was calculated correctly then the correct amount of tax has been paid.

KAPLAN PUBLISHING 75