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Zezee Nigeria Limited was incorporated on September 7, 2012, but it did not commence business until July 1, 2013. Based on the Memorandum and Articles of Association, the company was incorporated to carry on the business of distributorship and general contracting.
Extracts of the Company’s Statements of Profit or Loss and Other Comprehensive Income are as given below:
| Period | 6 Months Ended Dec 31, 2013 | Year Ended Dec 31, 2014 | Year Ended Dec 31, 2015 |
|---|---|---|---|
| Revenue | 5,430,000 | 12,600,000 | 18,400,000 |
| Direct Cost | (890,000) | (1,345,000) | (1,910,000) |
| Gross Profit | 4,540,000 | 11,255,000 | 16,490,000 |
| Other Income | 45,000 | 458,150 | 201,000 |
| Distribution Cost | (386,000) | (820,000) | (1,060,500) |
| Administrative Expenses | (4,810,550) | (6,510,440) | (8,240,600) |
| Other Expenses | (41,000) | (113,240) | (145,100) |
| Net (Loss)/Profit | (652,550) | 4,269,470 | 7,244,800 |
Additional Information:
| Details | 6 Months Ended Dec 31, 2013 | Year Ended Dec 31, 2014 | Year Ended Dec 31, 2015 |
|---|---|---|---|
| Sale of Scraps | – | 57,000 | – |
| Interest Received on Treasury Bills | – | 325,000 | 120,000 |
| Interest on Domiciliary Account | 45,000 | 76,150 | 81,000 |
| Total Other Income | 45,000 | 458,150 | 201,000 |
| Details | 6 Months Ended Dec 31, 2013 | Year Ended Dec 31, 2014 | Year Ended Dec 31, 2015 |
|---|---|---|---|
| Depreciation | 160,000 | 320,000 | 440,000 |
| Preliminary and Formation Expenses | 216,000 | – | – |
| Penalties and Fines | – | – | 65,000 |
| General Provision for Bad Debts | 110,000 | 180,000 | 240,000 |
| Staff Salaries | 2,060,000 | 4,230,000 | 4,230,000 |
| Office Rent | 600,000 | 1,200,000 | 1,800,000 |
| Asset | Date of Purchase | Cost (N) |
|---|---|---|
| Furniture and Fittings | June 7, 2013 | 980,000 |
| Motor Vehicles | June 30, 2013 | 2,400,000 |
| Office Equipment | July 1, 2013 | 1,200,000 |
| Period | 6 Months Ended Dec 31, 2013 | Year Ended Dec 31, 2014 | Year Ended Dec 31, 2015 |
|---|---|---|---|
| Net Assets | 1,360,000 | 2,870,500 | 3,260,700 |
| Paid-up Share Capital | 5,000,000 | 5,000,000 | 5,000,000 |
Required:
For all the relevant years of assessment, you are required to:
a. Compute the Adjusted Profit/Loss. (9 Marks)
b. Determine the Assessable Profit/Loss and advise the Company on whether or not to exercise its right of election. (6 Marks)
c. Compute the capital allowances. (4½ Marks)
d. Compute the tax liabilities. (10½ Marks)
(Total 30 Marks)
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For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:
| Item | Amount (₦) |
|---|---|
| Assessable profit | 8,200,000 |
| Capital allowances | 5,400,000 |
| Dividend payable | 6,000,000 |
Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.
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Dadinkowa Nigeria Limited has been in business since 2009 as a manufacturer of sugar cubes. The company sources its raw materials, sugar cane, from the Northern part of the country. However, due to local security challenges, the company has faced supply disruptions since 2016.
Additionally, the company has disagreements with tax authorities regarding the treatment of certain items (e.g., donations and dividend income) in their financial statements and returns. High overhead costs, especially energy expenses, have worsened operational challenges.
At a recent board meeting, the directors proposed either a temporary closure or relocating to a neighboring country if conditions do not improve in the next fiscal year. The General Manager shared this with you during your visit as the company’s tax consultant, seeking your advice to address these issues.
A scheduled meeting with the Managing Director requires you to prepare a comprehensive tax report addressing:
The profit or loss account for the year ended December 31, 2021, is as follows:
Profit or Loss Account:
Extract from the company’s statement of financial position as at December 31, 2021 revealed:
The following additional information was made available:
(v) Interest on loan was paid on a facility obtained from a licensed Nigerian deposit money bank at commercial interest rate.
(vi) General and administrative expenses were made up of:
(vii) Donations and subscriptions
Included in donations was N12,000,000 paid to a fund created by the Federal Government for victims of communal crisis that took place where the company is situated.
(viii) The tax written down values of the qualifying capital expenditure (QCE) items as at December 31, 2020 were:
(ix) Additions to QCEs during the year ended December 31, 2021 were:
(x) Unrelieved capital allowances brought forward were N15,200,000.
(xi) Unabsorbed losses from previous years were:
Required:
As the company’s Tax Consultant, you are to draft a report to the Managing Director for the scheduled meeting expected to hold next week. This is expected to address the following:
a. Determination of the company’s tax liabilities for the relevant tax year. (20 Marks)
b. Comment, in line with the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended) on:
i. The treatment of donations made by the company during the year under review (5 Marks)
ii. Exemption of dividends from taxation (5 Marks)
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Bivenette Petroleum Company Limited has been in the oil prospecting business for some years. Extracts from its financial statements for the year ended December 31, 2013 show the following information:
Additional Information:
You are required to:
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Debby Oil Limited is an oil prospecting company that has been operating in the deep ocean of the Niger Delta since 1990. The company makes up its accounts to December 31 each year.
The company is in discussion with a consortium of five deposit money banks in Nigeria for the purposes of taking a medium-term (5 years) loan facility of USD 5 million to finance further expansion of its facilities and acquisition of a marginal field. As part of the documents required by the banks for processing the loan facility are the audited financial statements and tax computations for the last five financial years. The company is yet to submit the documents for the year ended December 31, 2020, to the consortium.
The extract from its activities for the year ended December 31, 2020, is as presented below:
| Item | Amount (₦’000) |
|---|---|
| Oil inventory (Jan 1, 2020) | 1,220,000 |
| Oil inventory (Dec 31, 2020) | 1,380,000 |
| Sales – Export | 9,524,000 |
| Sales – Local | 2,900,500 |
| Other income | 1,235,300 |
| Production cost | 3,440,000 |
| Operating expenses | 1,789,600 |
| Intangible drilling cost | 1,425,200 |
| Tangible drilling cost | 532,000 |
| Traveling expenses | 54,000 |
| Salaries and wages | 1,860,000 |
| Pension fund contribution | 175,000 |
| Loan interest | 150,000 |
| General expenses | 800,500 |
| Depreciation | 170,000 |
| Royalties and production rentals | 810,000 |
| Donation | 20,000 |
| Bank charges | 25,300 |
| Harbour dues | 15,000 |
| Non-productive rent | 350,000 |
| Audit and accountancy fees | 28,000 |
| Customs duty on essentials | 7,300 |
| Income tax provision | 865,860 |
| Transfer to general reserves | 900,000 |
Additional Information:
Required:
As the company’s Assistant Tax Manager, draft a report to the Tax Manager showing the company’s tax liability for the relevant assessment year according to the Petroleum Profits Tax Act, Cap P.13, Laws of the Federation of Nigeria 2004 (as amended).
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Sunny Oil Producing Nigeria Limited is engaged in petroleum exploration in the deep sea off the coast of Bight of Benin in the Niger delta region since 2005. It is involved in a production sharing contract with the Nigerian National Petroleum Corporation. In order to consolidate its position in the Nigerian oil and gas sector, the company intends to diversify its operations into the ocean-going oil tanker transportation business in the next few months.
The company submitted its annual returns and statement of tax computation in respect of the year ended December 31, 2018, to the Federal Inland Revenue Service office in April 2019, but there was a disagreement between the amount raised by the tax office and that of the company. A check by the financial accountant of the company revealed that capital allowances on plant and equipment acquired for N120.5 million during the year, as well as a donation of N50 million made to an institution of higher learning, were not taken into consideration in the determination of assessable profit. A letter explaining this discrepancy was written by the Managing Director to the FIRS, but instead of the issue being resolved, a notice, giving the company date and time for hearing before the Tax Appeal Tribunal was received.
In order for the company to be properly guided in the pursuit of the case before the tribunal, it was resolved that a competent firm of Chartered Accountants with a bias in oil and gas accounting and taxation should be engaged.
Your firm has been appointed as the company‘s tax consultants with the mandate of representing the company at the sittings of the Tax Appeal Tribunal. Relevant documents in respect of the acquisition of the plant and equipment and donation were made available to you.
The extract from the books of accounts of the company for the year ended December 31, 2018 revealed the following:
(i) Export sales:
Price per barrel at 36° API:
(ii) Actual realised price is arrived at after adjusting for the variance in API. For every API, $0.03 is the variance in price at 36°.
(iii) Domestic sales: 80,000 barrels at N720 per barrel.
(iv) Expenses incurred include:
| Description | Amount (N’000) |
|---|---|
| Operating expenses | 255,000 |
| Production and exploration | 1,100,600 |
| Intangible drilling cost | 420,800 |
| Administrative expenses | 225,500 |
| Non-productive rent | 80,700 |
| Bad debts written off | 20,150 |
| Repairs and renewals | 92,600 |
| Transportation and traveling | 73,200 |
| Royalties | 222,900 |
| Miscellaneous expenses | 63,800 |
| Salaries and wages | 830,700 |
| Pension fund contribution | 74,450 |
| Customs duty (non-essentials) | 10,400 |
| Harbour dues | 3,300 |
| Stamp duties on debenture | 2,500 |
| Interest on loan | 52,350 |
| Cost of 3 appraisal wells | 120,000 |
| Income tax provision | 750,000 |
| Transfer to special reserves | 255,000 |
Additional Information:
(i) Production and exploration include N80 million incurred on tangible drilling operation and depreciation of N200.2 million.
(ii) Royalties include an amount of N22.5 million in respect of royalties on domestic sales.
(iii) Miscellaneous expenses include, among others, N12.75 million spent on obtaining information on the existence of oil in the Middle-Belt and N50 million donation to a public university in one of the states in the Niger delta region.
(iv) The Joint Tax Board gave approval for the operation of the pension fund contribution in the company.
(v) Interest on the loan includes N12.3 million paid to a subsidiary company. The transaction was made at the prevailing market rate.
(vi) The company entered into a gas contract with the following:
| Company | Load factor | Amount (N’000) |
|---|---|---|
| Akin Gas Limited | 66 | 220,000 |
| Bollah Limited | 71 | 350,000 |
(vii) Schedule of qualifying capital expenditure:
(viii) Unutilised capital allowance and loss brought forward from the previous year were N12.5 million and N750 million, respectively.
(ix) Capital allowance as agreed with the relevant tax authority was N130.25 million.
(x) The amount stated in respect of transfer to special reserves was approved by the company’s Board of Directors to be utilised for future investment opportunities.
(xi) Assume N305 is equivalent to US $1.
(xii) Profits from petroleum exported or sold domestically are taxable at 85%.
Required:
a. As the company‘s tax consultant, you are to draft a report to the Managing Director explaining the following:
i. The preparation which you and the company should make before the commencement of the proceedings at the tribunal. (2 Marks)
ii. Steps to be taken by the company if the decision of the tribunal is not acceptable to it. (2 Marks)
iii. The tax implication of the company‘s proposed transportation business. (1 Mark)
b. Re-computing the following:
i. Assessable profit (8 Marks)
ii. Chargeable profit (3 Marks)
iii. Assessable tax (1 Mark)
iv. Chargeable tax (1 Mark)
v. Total tax payable (2 Marks)
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Ayokunle Oil Nigeria Limited engages in petroleum operations. The company was incorporated in 2005 but commenced business in January 2010. It operates in the continental shelf at a water depth of 155 metres. The company makes up its accounts to December 31 each year.
The company has presented the following statement of activities for the year ended December 31, 2016:
Expenses incurred:
| Expense Type | Amount (₦) |
|---|---|
| Operating costs | 523,750 |
| Non-productive rent | 110,420 |
| Intangible drilling cost | 439,000 |
| Custom duty | 53,200 |
| Salaries and other personnel costs | 280,500 |
| Interest paid | 50,410 |
| Royalty on oil exported | 110,600 |
| Royalty on local sales | 41,200 |
| Stamp duty | 1,050 |
| Donations | 22,000 |
| Transportation | 72,070 |
| Administration and general expenses | 340,200 |
| Bad debts | 66,000 |
| Pension contribution | 21,000 |
| Miscellaneous expenses | 32,170 |
Additional Information:
Required:
Determine for the relevant assessment year the following:
a. Assessable Profit (7 Marks)
b. Chargeable Profit (3 Marks)
c. Chargeable Tax (1 Mark)
(Total 15 Marks)
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Ibrahim Oil Nigeria Limited is an oil prospecting company which commenced production in commercial quantity in 2008. Its accounting year end is December 31. The company has provided the following Statement of Profit or Loss for the year ended December 31, 2016:
| Description | Amount (N’000) |
|---|---|
| Revenue (value of oil produced) | 2,455,200 |
| Operating costs | (952,500) |
| Non-productive rent | (63,200) |
| Royalty on export sales | (14,775) |
| Depreciation of Property Plant and Equipment | (65,400) |
| Tangible drilling cost | (53,800) |
| Donation | (2,500) |
| Stamp duties | (1,250) |
| Repairs and renewal of machinery | (2,000) |
| Exploration and drilling costs | (100,300) |
| Custom duties on Plant and Machinery | (1,130) |
| Bad and doubtful debts | (26,500) |
| Pension and provident funds | (30,600) |
| Interest paid | (26,200) |
| General expenses | (11,050) |
| Income tax provision | (120,000) |
| Net Profit | 983,995 |
Additional Information:
Required: Determine for the relevant assessment year, the following:
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Tamilore Limited (TL) is an agro-based firm, specializing in yam and rice production in Benue State of Nigeria. One of the harvesters is due to be replaced on November 30, 2018, the last day of TL’s current financial year. An investment appraisal exercise has recently been completed which confirmed that it is financially beneficial to replace the machine at this point. TL is now considering how best to finance the acquisition of the harvester to be replaced. TL is already highly geared.
A government development agency has offered the following two alternative methods of financing the machine:
Alternative 1
A loan of N49,200,000 at 6% interest rate to buy the machine on November 30, 2018. If this option is selected, the machine will be depreciated on a straight-line basis over its estimated useful life of 5 years.
Alternative 2
Enter into a finance lease. This will involve payment of annual rental of N12 million with the first payment due on November 30, 2019. The lease payments will be for the entire estimated useful life of the machine, which is 5 years, after which ownership will pass to TL without further payment.
Other information
(i) Whether leased or purchased outright, maintenance would remain the responsibility of TL and would be N450,000 payable annually in advance.
(ii) TL is liable to tax at a rate of 25%, payable annually at the end of the year in which the tax charge or tax saving arises.
(iii) TL is able to claim capital allowances on the full capital cost of the machine in equal installments over the first four years of the machine.
(iv) Assume that TL has sufficient taxable profits to benefit from any savings arising therefrom.
(v) All workings in N’000.
Required:
a. Show that the implied interest rate in the lease agreement is 7%. (3 Marks)
b. Advise, using present value method, whether Tamilore Limited should borrow to buy the machine or lease it. (12 Marks)
c. Instead of lease financing, one director has suggested an equivalent Islamic finance.
i. Explain briefly the principles of Islamic finance. (2 Marks)
ii. Explain three main advantages of Islamic finance. (3 Marks)
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Mandy Construction Nigeria Limited is an engineering company incorporated on January 1, 2009, and commenced business the same day. The company makes up its accounts to June 30 each year. The company had prepared its tax returns for the 2017 assessment year and was of the opinion that it had no total profit and therefore was not subject to companies income tax.
As a tax consultant, the chief executive officer has requested you to review the tax returns to ascertain if any provision of the tax laws stipulates procedures to determine the tax payable in situations where there is no taxable profit or the total profit results in no tax payable.
The following information relates to the company’s records for the year ended June 30, 2016:
Statement of Profit or Loss for the year ended June 30, 2016:
| Particulars | N’000 |
|---|---|
| Revenue | 5,656,000 |
| Cost of Sales | (4,404,211) |
| Gross Profit | 1,251,789 |
| Other Income | 152,240 |
| Administrative Expenses | (907,906) |
| Operating Profit | 496,123 |
| Investment Income | 50,934 |
| Finance Costs | (890,657) |
| Loss Before Tax | (343,600) |
| Income Tax | – |
| Loss for the Year | (343,600) |
Additional Information:
(i) Included in administrative expenses are the following:
(ii) Capital allowances agreed with the tax office: N1,065,000
The company’s authorized, issued, and fully paid-up share capital of N1 each is provided as follows:
The net assets of the company extracted from the statement of financial position as at June 30, 2016, was N3,441,041,000.
Required:
From the available information, compute the companies income tax payable by Mandy Construction Nigeria Limited for the relevant assessment year.
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The following extract relates to the financial data of Therry Ltd, a company resident in Ghana with a basis period from January to December each year. Therry Ltd has submitted its tax returns to GRA for the 2020 year of assessment:
The following additional information is available:
Interest Charges:
a. Interest on loan for MD’s personal housing project GH¢500,000
b. Foreign exchange loss on loan GH¢320,500
c. Bank charges GH¢75,000
Donations:
a. Osu Children Home GH¢10,000
b. Pastor (Azigi Church) GH¢30,000
c. Labone Senior High School GH¢20,000
d. National Disaster Management Organisation GH¢50,000
e. Political Parties Fundraising GH¢90,000
An amount of GH¢200,000 disclosed in the accounts was paid for repairs and improvements of an old machine bought three years ago. It is hoped that the performance of the machine will be enhanced after the improvements.
Creditors of the company agreed to cancel an amount of GH¢120,000 standing as part of the credit balance as incentive to the company. This has not been taken into account by the company in its tax returns to GRA.
An amount of GH¢300,000 being cost price of goods was issued to a related party outside Ghana at cost. The margin on the goods waived was sighted as GH¢40,000 in a correspondence with the related party.
Tax paid on account was GH¢20,000.
The company booked capital allowance unutilised certified by GRA from 2019 year of assessment as GH¢300,000.
Capital allowance agreed with GRA after taking into account all relevant issues was GH¢1,050,000 for 2020 year of assessment.
The machine (Pool 3 asset) had a written down value of GH¢4,000,000 as at 1 January 2020.
An allowable bad debt included in the selling and distribution expenses for 2019 amounted to GH¢100,000. The company recovered the amount in 2020 but no transaction was recorded in 2020.
Therry Ltd disposed off one of its capital assets for GH¢250,000 to the Managing Director. It cost the company GH¢300,000 to acquire the asset some years ago. An investigation revealed that the market value of the asset at the time of the sale was GH¢350,000. The company has already included the loss of the sale of the asset in administration expenses.
Required:
Determine the tax payable for the 2020 year of assessment. (20 marks)
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Valentine Ghana Limited is a producer of love greeting cards, and the following was extracted from its financial statements for the year ended 31 December 2018.
a) Valentine Ghana Limited is a producer of love greeting cards and the following was
extracted from its financial statements for the year ended 31 December,2018.
Deduct:
Net Profit: GH¢346,110
Additional Information:
i) Capital allowances for the year were GH¢204,000, as agreed with the Ghana Revenue Authority (GRA).
ii) The figures for repairs and maintenance include an amount of GH¢33,150 for the cost of erecting a new gate to the factory.
iii) 50% of other income was the personal rental income of the Managing Director.
iv) One-third of vehicle running expenses was expended on the personal car of the Managing Director, used for the company’s operation based on company policy.
Required:
Calculate the chargeable income of Valentine Ghana Limited for 2018 Year of Assessment.
(8 marks)
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Stella-VD Company Limited, manufacturers of fruit juice for local consumption, commenced business on 1/10/2017, with an accounting year-end at 31 December. The company submitted its accounts for 2017 and was assessed accordingly. The company submitted its tax returns for the 2018 year of assessment to the Ghana Revenue Authority on 30/04/2019. Below are the details:
iii) Staff Welfare
Staff Medical Bills: 3,700
Safety Wear for Staff: 10,500
Canteen Equipment purchased on 30/11/2018: 12,000
iv) Donation and Subscription
Goods given as Gratis to Customs Officials: 13,000
Donation of Goods to SOS Children Village: 10,000
Subscription to Association of Ghana Industries: 5,000
v) Wages and Salaries
Old Staff: 120,000
Fresh Graduates employed by Stella-VD Ltd: 26,000
Fresh Graduates constitute 0.9% of the total workforce
vi) Other Income
Compensation from a Customer for Cancellation of Sale Order: 8,000
Compensation for Loss of Trading Stock of the Company: 10,000
Compensation for Cancellation of Purchase Order by Supplier: 5,000
The Company’s assets include the following:
Type of Assets Date of Acquisition Cost (GH¢)
Factory Building 01/10/2017 300,000
Plant and Machinery 25/10/2017 171,000
Delivery Van 01/11/2017 50,000
Computers 01/10/2017 40,000
Furniture and Fittings 10/12/2017 150,000
Other Office Equipment 01/10/2017 200,000
Office Building 30/06/2018 500,000
Required:
a) Compute the appropriate capital allowance for the 2017 and 2018 years of assessment.
(8 marks)
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Fafana Manufacturing Company Ltd, producers of special fruit juice, started business on 01/01/2016 and prepares accounts to 31 December each year. The company had constructed an office building, which was put into use on 01/01/2016. The following are the capital allowance written down values brought forward from pools of assets as at 01/01/2017:
| Item | Written Down Value (GH¢) |
|---|---|
| Pool 1 | 12,000 |
| Pool 2 | 520,000 |
| Pool 3 | 405,000 |
| Office Building | 540,000 |
| Patent (acquired in 2016 for five years) | 48,000 |
The company acquired the following chargeable assets for the business in 2017:
Some assets were disposed of in 2017, namely:
The company acquired the following chargeable assets for the business in 2018:
One of the vehicles was involved in an accident in 2018, and the company received GH¢45,000 as insurance compensation.
Required:
a) Determine the capital allowances for Fafana Manufacturing Company Ltd for 2017 and 2018 years of assessment. (16 marks)
b) Indicate how the class or pool system works with the treatment of capital allowances. (4 marks)
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Partey Ltd (Partey) produces flour and various soup powders, and the company is considered as a priority company. On 1 January 2019, Partey owned two refineries in Accra (Weija and Mamprobi) and a refinery in Takoradi. Each refinery comprises building, plant and equipment and a warehouse, all of which were owned by Partey.
Partey has been having financial difficulties and, on 1 February 2019, engaged the services of a business consultant to recommend a survival plan for the company. Unfortunately, staff morale was very low when the business consultant was engaged because their salaries were six months in arrears.
The business consultant’s recommendations were agreed and implemented in the year ended 31 December 2019 as follows:
i) The Takoradi refinery was transferred to the employees at market value to be operated as independent business ventures. The inventory in the warehouse was included in the transfer.
ii) The Weija refinery was disposed off, together with all its related fixed assets, to fund Partey’s future business operations and pay off part of the arrears of salaries due to the employees. The employees at this refinery were all reassigned elsewhere. The inventory at the warehouse, valued at cost, was given to the employees as final settlement of their salaries in arrears.
Both the disposal of the Weija refinery and the transfer of the Takoradi refinery to their employees were made on 30 March 2019.
Details of the fixed assets disposed and transferred are:
Partey’s statement of profit or loss for the year ended 31 December 2019 in respect of
Mamprobi is as follows:
Notes:
i) This amount represents Partey’s ordinary sales for the year.
ii) Included in the cost of sales is the total value of inventory at cost transferred to the
employees (in accordance with the business consultant’s recommendations) on 30 March
2019. No other adjustments were recorded regarding this inventory transfer.
Required:
a) Outline the tax consequences for Partey due to the transfer of the fixed assets and inventory to the employees on 30 March 2019, stating when any taxes should be paid. (4 marks)
b) Assess the tax implications:
i) When the proceeds from the realisation of depreciable assets exceed the written down values? (1.5 marks)
ii) When the proceeds from the realisation of depreciable assets are less than the written down values? (1.5 marks)
c) Calculate the taxable income of Partey for the year ended 31 December 2019. (8 marks)
d) Explain how shareholders of a company are taxed? (5 marks)
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Finstruct Ltd has been awarded an airport terminal project. The project started on 1 January 2022 for a contract sum of GH¢60,000,000. The construction of the airport is to be completed on 31 December 2023.
Finstruct Ltd has a financial year ending on 31 December each year. On 31 December 2022, the accounts appropriate to the airport contract contained the following:
| Cost Item | GH¢ |
|---|---|
| Cost of construction materials | 25,500,000 |
| Direct wages of construction staff | 22,100,000 |
| Hire of special equipment | 300,000 |
| Cost of soil test | 100,000 |
| Purchase of fuel and lubricants | 750,000 |
| Consultancy services | 135,000 |
Additional information:
i) Materials costing GH¢340,000 sent to the site were returned to the company’s warehouse.
ii) Materials sent to the site worth GH¢675,000 were still unused at the construction site as of 31 December 2022.
iii) Finstruct Ltd pays some of its workers the first week of the ensuing month after the end of the current month. GH¢57,000 is still owed for wages as of the close of the year 2022, and this was not included in the accounts.
iv) A bill amounting to GH¢45,000 was submitted late by Finstruct Ltd, and as of 31 December 2022, the bill had not yet been paid. This was not included in the accounts.
v) It is estimated that the cost to complete the project as of 31 December 2022 should be GH¢8,265,180.
vi) The following details are available on assets of Finstruct Ltd:
Required:
a) Compute the capital allowance for Finstruct Ltd for the year 2022. (6 marks)
b) Explain the tax rules on long-term contracts and compute the percentage of contract completion of the project. (4 marks)
c) Compute the chargeable income of Finstruct Ltd for the year ended 31 December 2022. (10 marks)
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STE Ltd was incorporated in 2020 and commenced business operations on 1 January 2021, specializing in manufacturing and distributing solar panels and related products. The company secured a two-year loan of GH¢750,000 with an interest rate of 15% per annum from a local financial institution. The loan was applied as follows:
| Loan Application | Amount (GH¢) |
|---|---|
| Showroom construction at Tema | 100,000 |
| Procurement of plant and machinery | 250,000 |
| Procurement of raw materials | 300,000 |
| Procurement of commercial vehicles | 70,000 |
| Amount applied towards 2021 consultancy fees | 30,000 |
| Total | 750,000 |
The company’s fixed asset register as at 31 December 2021 is as follows:
| Fixed Assets | Cost (GH¢) | Depreciation (GH¢) | Net Book Value (GH¢) |
|---|---|---|---|
| Head office building | 150,000 | 3,750 | 146,250 |
| Factory building | 120,000 | 6,000 | 114,000 |
| Furniture and fittings | 65,000 | 6,500 | 58,500 |
| Office computers | 80,000 | 16,000 | 64,000 |
| Total | 415,000 | 32,250 | 382,750 |
STE’s statement of comprehensive income for the year ended 31 December 2021 is as follows:
Additional information:
Required:
a) Calculate the maximum capital allowances claimable by STE Ltd for the year ended 31 December 2021.
b) Calculate the chargeable income and tax payable by STE Ltd for the year ended 31 December 2021.
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If you’re not subscribed to a plan, click on the button below to choose a plan