- 10 Marks
AT – May 2017 – L3 – Q4c – Business income – Corporate income tax
Calculate the capital allowance for the year 2016 after the exchange of assets, and discuss the treatment of goodwill.
Question
c) Sakote Ltd, a trading company, has the following extracts from its financial records:
- It bought a 4 X 4 Vehicle for an amount of GH¢225,000.00 in the year 2015. The cost of the vehicle was limited to an amount of GH¢75,000 for capital allowance purposes in the year 2015.
- It also put up a building at a cost of GH¢150,000.00 in the same year. The cost of the land was GH¢20,000 and GH¢130,000 was the cost of the building.
- The Company accordingly informed the Commissioner-General about putting the assets into use and in the generation of its income in 2015 year of assessment.
- In the year 2016, it exchanged the vehicle for 4 plots of land. The value of the plots of land agreed with the landowners was GH¢220,000. The exchange was deemed satisfactory to both parties, and documentations were carried through.
Required:
i) Calculate the amount of capital allowance claimable for 2016 year of assessment by Sakote Ltd. (7 marks)
ii) Sakote Ltd paid for Goodwill amounting to GH¢10,000 in 2016 and intends to grant capital allowance on the value of the goodwill. Explain whether or not this arrangement is in accordance with the tax laws. (3 marks)
(Total: 10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Asset exchange, Capital Allowance, Corporate Income, Depreciable assets, Tax implications
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: MAY 2017
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