Test: Shares and Valued Added Tax - 1 - JAMB MCQ

Share capital refers to the total amount of money invested by shareholders in a company.

Total dividend paid = Dividend per share × Number of shares
= ₦5 × 500,000
= ₦2,500,000

Value of the shareholder's investment = Market value per share × Number of shares
= ₦10 × 500
= ₦50,000

The rate of return is calculated by dividing the profit earned on an investment by the initial investment.

Let the profit before tax be P.
Tax = 20% of P
Profit after tax = P - Tax
₦500,000 = P - (0.20 × P)
₦500,000 = P - 0.20P
₦500,000 = 0.80P
P = ₦500,000 / 0.80
P = ₦625,000 (Profit before tax)

The current Value Added Tax (VAT) rate in Nigeria is 7.5%.

Let the original price before VAT be P.
VAT = 7.5% of P
Price inclusive of VAT = P + VAT
₦1,000 = P + 0.075P
₦1,000 = 1.075P
P = ₦1,000 / 1.075
P ≈ ₦825 (Original price before VAT)

The amount of VAT paid on an item can be calculated by subtracting the VAT from the item price.

Total amount of VAT collected = Sales revenue × VAT rate
= ₦2,000,000 × 0.075
= ₦150,000

The VAT rate applied is equal to the percentage increase in price due to VAT. Therefore, if the price of an item increases by 10%, the VAT rate applied is 10%.