Adjusted Profit Computation

AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

Question

Takyi and Kuro commenced a retail business in Goaso, Ghana on 1 January 2020, under the partnership name Ntaafo LTD, sharing profits and losses equally. On 1 January 2023, Tawia was admitted as a new partner. Takyi, Kuro, and Tawia then shared profits and losses in the ratio of 3:2:1 respectively. The partnership prepares its accounts to 31 December annually.

The partnership’s profit and loss account for the year ended 31 December 2023 is as follows:

Note	GH¢	GH¢
Gross Trading Profit		4,365,000
Compensation	(1)	50,000
Total Revenue		4,415,000
Less: Operating Expenses
Audit Fees		25,000
Rent and Rates	(2)	348,000
Wages and Salaries	(3)	1,410,000
Interest on Capital	(4)	205,000
Contribution towards National Insurance Scheme		111,000
Trade Debts Written Off (Bad Debts)		92,000
Legal Fees	(5)	43,000
Entertainment	(6)	270,000
Motor Expenses	(7)	87,000
Repairs and Maintenance	(8)	190,000
Commission	(9)	310,000
Printing and Stationery		82,000
Electricity and Telephone		51,000
Depreciation		123,000
Sundry Expenses		270,000
Total Expenses		3,617,000
Net Profit		798,000

Notes:

Compensation:
- Compensation received from suppliers for delays in supplies: GH¢70,000
- Court fines paid to client for negligence: (GH¢20,000)
Rent and Rates:
- Rent for business premises: GH¢180,000
- Rent for Takyi’s private residence: GH¢156,000 (Disallowed)
- Business operating permit paid to Goaso Municipal Assembly: GH¢12,000
Wages and Salaries:
- Takyi: GH¢180,000
- Kuro: GH¢240,000
- Tawia: GH¢66,000
- Mrs. Takyi (staff): GH¢120,000
- Mrs. Tawia (staff): GH¢144,000
- Other staff: GH¢660,000
Interest on Capital:
- Takyi: GH¢30,000
- Kuro: GH¢40,000
- Tawia: GH¢10,000
- Bank interest: GH¢125,000
Legal Fees:
- Renewal of annual tenancy agreements: GH¢8,000
- Collection of trade debts: GH¢10,000
- Preparing contract documents (suppliers and contractors): GH¢5,000
- Preparing contract documents to acquire a new company: GH¢20,000 (Disallowed)
Entertainment:
- The entertainment expenses relate to the partners’ private enjoyment (Disallowed).
Motor Car Expenses:
- Petrol: GH¢52,000
- Repairs: GH¢30,000
- Fines for late renewal of vehicle license: GH¢5,000 (Disallowed)
Repairs and Maintenance:
- Replacement of bolts and nuts on Plant and Machinery: GH¢10,000
- Major expenditure on Landscaping and Renovation: GH¢180,000 (Capitalized)
Commission:
- Takyi (for introducing a new customer to the business): GH¢20,000 (Disallowed)
- Salesmen and Saleswomen: GH¢230,000
- Unidentified recipient: GH¢60,000 (Disallowed)

Other Information:

Capital allowance agreed with the Ghana Revenue Authority (GRA) was GH¢234,000 for the 2023 year of assessment.

Required:
Compute the partnership’s chargeable income for the 2023 year of assessment.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit Computation, Capital Allowance, chargeable income, Disallowed Expenses, Partnership Taxation, Tax adjustments
Level: Level 3

Topic: Business income - Corporate income tax
Series: Nov 2024

ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses

Analyze the tax implications for Hyland Nigeria Ltd, including adjusted profit, tax payable, dividend tax implications, and tax benefits for reconstituted companies.

Question

Hyland Nigeria Limited commenced business as a manufacturer of stationery on January 1, 2021. The company, in December 2020, acquired all the assets and liabilities of a foreign company operating in Nigeria, Lowland Incorporated, and reconstituted it for turnaround and profitability.

The directors of the newly reconstituted company have considered the draft financial statements and annual tax returns for the year ended December 31, 2021. During a board meeting, there was disagreement over the tax treatment of dividends received (N3,600,000) from equity holdings in another Nigerian public limited liability company. The dividends are also part of the proposed profits to be distributed to shareholders.

Additionally, one director suggested that as a reconstituted company, Hyland Nigeria Limited may qualify for tax reliefs or incentives that could positively affect profitability. Following the board’s decision, the Managing Director contacted your firm to provide professional advice on these matters.

The following financial information is extracted from the company’s records:

The following additional relevant information was provided:
(i) Subscription and donations consisted of:

(ii) Allowance for doubtful debts included:

(iii) Repairs and maintenance was made up of:

(iv) Legal and professional fees included:

(v) Other operating expenses were:

(vi) Tax written down values of qualifying capital expenditure (QCE) as at December 31, 2020:

(vii) Additional assets acquired during the year ended December 31, 2021:

(viii) Unrelieved losses as at December 31, 2020 was N55,900,000.
(ix) Unutilised capital allowances as at December 31, 2020 was N16,155.000.

Required:

Calculate the Adjusted Profit of the company for the year ended December 31, 2021.
Compute the Tax Payable for the relevant assessment year.
Provide professional advice on the tax implications of the dividends received for the company and its shareholders.
Comment on tax benefits/incentives applicable to a reconstituted company in Nigeria as per the Companies Income Tax Act 2004 (as amended).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit Computation, Dividend Tax Implications, Tax Benefits, Tax Payable Computation
Level: Level 3

Topic: Taxation of Specialized Businesses

AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

Question

The partnership’s profit and loss account for the year ended 31 December 2023 is as follows:

Note	GH¢	GH¢
Gross Trading Profit		4,365,000
Compensation	(1)	50,000
Total Revenue		4,415,000
Less: Operating Expenses
Audit Fees		25,000
Rent and Rates	(2)	348,000
Wages and Salaries	(3)	1,410,000
Interest on Capital	(4)	205,000
Contribution towards National Insurance Scheme		111,000
Trade Debts Written Off (Bad Debts)		92,000
Legal Fees	(5)	43,000
Entertainment	(6)	270,000
Motor Expenses	(7)	87,000
Repairs and Maintenance	(8)	190,000
Commission	(9)	310,000
Printing and Stationery		82,000
Electricity and Telephone		51,000
Depreciation		123,000
Sundry Expenses		270,000
Total Expenses		3,617,000
Net Profit		798,000

Notes:

Compensation:
- Compensation received from suppliers for delays in supplies: GH¢70,000
- Court fines paid to client for negligence: (GH¢20,000)
Rent and Rates:
- Rent for business premises: GH¢180,000
- Rent for Takyi’s private residence: GH¢156,000 (Disallowed)
- Business operating permit paid to Goaso Municipal Assembly: GH¢12,000
Wages and Salaries:
- Takyi: GH¢180,000
- Kuro: GH¢240,000
- Tawia: GH¢66,000
- Mrs. Takyi (staff): GH¢120,000
- Mrs. Tawia (staff): GH¢144,000
- Other staff: GH¢660,000
Interest on Capital:
- Takyi: GH¢30,000
- Kuro: GH¢40,000
- Tawia: GH¢10,000
- Bank interest: GH¢125,000
Legal Fees:
- Renewal of annual tenancy agreements: GH¢8,000
- Collection of trade debts: GH¢10,000
- Preparing contract documents (suppliers and contractors): GH¢5,000
- Preparing contract documents to acquire a new company: GH¢20,000 (Disallowed)
Entertainment:
- The entertainment expenses relate to the partners’ private enjoyment (Disallowed).
Motor Car Expenses:
- Petrol: GH¢52,000
- Repairs: GH¢30,000
- Fines for late renewal of vehicle license: GH¢5,000 (Disallowed)
Repairs and Maintenance:
- Replacement of bolts and nuts on Plant and Machinery: GH¢10,000
- Major expenditure on Landscaping and Renovation: GH¢180,000 (Capitalized)
Commission:
- Takyi (for introducing a new customer to the business): GH¢20,000 (Disallowed)
- Salesmen and Saleswomen: GH¢230,000
- Unidentified recipient: GH¢60,000 (Disallowed)

Other Information:

Capital allowance agreed with the Ghana Revenue Authority (GRA) was GH¢234,000 for the 2023 year of assessment.

Required:
Compute the partnership’s chargeable income for the 2023 year of assessment.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit Computation, Capital Allowance, chargeable income, Disallowed Expenses, Partnership Taxation, Tax adjustments
Level: Level 3

Topic: Business income - Corporate income tax
Series: Nov 2024

ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses

Analyze the tax implications for Hyland Nigeria Ltd, including adjusted profit, tax payable, dividend tax implications, and tax benefits for reconstituted companies.

Question

The following financial information is extracted from the company’s records:

The following additional relevant information was provided:
(i) Subscription and donations consisted of:

(ii) Allowance for doubtful debts included:

(iii) Repairs and maintenance was made up of:

(iv) Legal and professional fees included:

(v) Other operating expenses were:

(vi) Tax written down values of qualifying capital expenditure (QCE) as at December 31, 2020:

(vii) Additional assets acquired during the year ended December 31, 2021:

(viii) Unrelieved losses as at December 31, 2020 was N55,900,000.
(ix) Unutilised capital allowances as at December 31, 2020 was N16,155.000.

Required:

Calculate the Adjusted Profit of the company for the year ended December 31, 2021.
Compute the Tax Payable for the relevant assessment year.
Provide professional advice on the tax implications of the dividends received for the company and its shareholders.
Comment on tax benefits/incentives applicable to a reconstituted company in Nigeria as per the Companies Income Tax Act 2004 (as amended).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit Computation, Dividend Tax Implications, Tax Benefits, Tax Payable Computation
Level: Level 3

Topic: Taxation of Specialized Businesses

Question Tag: Adjusted Profit Computation

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AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses

Analyze the tax implications for Hyland Nigeria Ltd, including adjusted profit, tax payable, dividend tax implications, and tax benefits for reconstituted companies.

AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses

Analyze the tax implications for Hyland Nigeria Ltd, including adjusted profit, tax payable, dividend tax implications, and tax benefits for reconstituted companies.

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AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

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ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses

Analyze the tax implications for Hyland Nigeria Ltd, including adjusted profit, tax payable, dividend tax implications, and tax benefits for reconstituted companies.

You're reporting an error for "ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses"

AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

You're reporting an error for "AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income"

ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses

Analyze the tax implications for Hyland Nigeria Ltd, including adjusted profit, tax payable, dividend tax implications, and tax benefits for reconstituted companies.

You're reporting an error for "ATAX – May 2023 – L3 – Q1 – Taxation of Specialized Businesses"

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