Question Tag: Financial cost

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TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

Question

a) Kaato Mining Company Ltd (Kaato) has been operating in the mining sector for some time now. The following data is relevant to the company’s operations for the 2017 year of assessment:

GH¢

Adjusted profit: 100,000,000
The following additional information is relevant:

Financial cost of GH¢900,000 inclusive of interest on working capital loan of GH¢20,000 was adjusted in arriving at the adjusted profit.
Financial gain from derivatives of GH¢600,000 was adjusted in arriving at the adjusted profit above.
Depreciation of GH¢125,000 was adjusted to the profit above.
Written down value brought forward from 2016 after 1-year capital allowance was granted stood at GH¢1,000,000. This was accordingly certified by the Audit Unit of the Ghana Revenue Authority.
Revenue of GH¢1,200,000,000 was realized on a quantity of gold production of 80,000,000 ounces. A review of the tax returns of Kaato Ltd revealed that Mineral Royalty was not calculated for 2017. Kaato applied for a waiver of penalty and interest on the mineral royalty to which GRA obliged.
Required: i) Compute the taxes payable. (6 marks)

ii) What is the tax treatment of financial cost under mineral operations? (2 marks)

Answer

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Tags: Capital Allowance, Depreciation, Financial cost, Financial Gain, Mineral Royalty, Mining, Tax computation
Level: Level 3

Topic: Petroleum operations
Series: MAY 2019

AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

Question

a) You are a Trainee Accountant, and your manager has asked you to correct a company tax
computation which has been prepared by the Managing Director of Prime Shea Ltd, a
manufacturing company located in Batanyili, a suburb of Tamale in the Northern Region.
The company commenced business on 1 January 2014. The company tax computation is
for the year ended 31 March 2020 and contains a significant number of errors:

Required:
i) Determine the allowable financial cost for the year ended 31 December 2020. (4 marks)
ii) Prepare a revised tax computation to determine the chargeable income for the year ended
31 December 2020. (4 marks)
iii) Calculate the tax payable by Prime Shea Ltd under the Income Tax Act 2015 (Act 896) as
amended. (2 marks)

b) You are a final level CA student who has been helping Naagode Ltd on tax issues. Naagode Ltd has been doing business in the international space, importing and exporting products. You have been told that when you qualify, you would manage their Tax Department.

What has baffled the company lately is an audit outcome by the Ghana Revenue Authority. The audit was done in two-folds. One by the Post Clearance Audit Department of the Customs Division and the other by Tax Audit and Quality Assurance (TAQA) Department of Domestic Tax Revenue Division.

The audit findings are as follows:

Post Clearance Audit Department of the Custom Division:
Import Duties GH¢10,000,000
Value Added Tax (VAT) GH¢12,000,000
National Health Insurance Levy (NHIL) GH¢4,000,000
Ghana Education Trust Fund (GET/Fund) GH¢4,000,000

TAQA Department of Domestic Tax Revenue Division:
Corporate Tax GH¢230,000,000
VAT GH¢29,000,000
NHIL GH¢29,000,000
Withholding Tax (WHT) GH¢105,000,000

The management of Naagode Ltd has asked you to assess the chances of the Company if an objection to the assessment is raised as it considers the assessment quite excessive.

Required:
Recommend the process that the management should adopt to ensure success in its appeal.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, chargeable income, Financial cost, Ghana Revenue Authority, Objection process, Tax Compliance, Tax computation, Tax payable, Unrelieved loss, Withholding Tax
Level: Level 3

AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation

Advise on the tax implications of Japan Rocks acquiring 60% of shares in Konadu Yiadom Ltd.

Question

The shareholders of Japan Rocks, a computer chip manufacturing company based in Japan, are planning on acquiring 60% of the shares in Konadu Yiadom Ltd in Ghana. The return on income for Konadu Yiadom Ltd for the year ended 31 December 2020 showed a loss of GH¢3,600,000 and the financial cost of GH¢900,000.

Required:
Advise Japan Rocks and its shareholders on the income tax implications of the acquisition of shares by Japan Rocks and the treatment of financial cost.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acquisition, Corporate Tax, Financial cost, Shareholding, Tax Loss
Level: Level 3

Topic: Mergers, amalgamation, and reorganization
Series: MAY 2021

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

Question

Exclusif Homes Ghana Ltd is a wholly owned Ghanaian real estate company. The basis period of the company ends on 31 December each year. The company has obtained a government contract to build low-cost houses across the country. In order to raise additional capital to undertake this project, the company is looking for an investor who would acquire at least 51% of the shares of the company. The managers of the company are engaged in negotiations with several potential investors, and there is the likelihood of having an investor and agreements signed on 31 January 2022.

The financial statements of Exclusif Homes Ghana Ltd revealed that the company made a loss of GH¢2,500,000 for the period ended 31 December 2021. Included in the expenses of the company are financial costs and bad debt amounting to GH¢100,000 and GH¢150,000 respectively.

The company also has a parcel of land located at Abokobi which the company purchased three years ago at the cost of GH¢100,000. The current value of the land is GH¢500,000.

Required:
Advise Exclusif Homes Ghana Ltd on the following:

The income tax implications for the company if an investor acquires 51% of the company’s shares and the tax planning opportunities available which could reduce the income tax exposure of the company if an investor acquires 51% of the company’s shares.
Measures the acquirer can adopt to mitigate the tax effects (if any) of the proposed transaction.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Change in Ownership, Financial cost, Share Acquisition, Tax Loss, Tax Planning
Level: Level 3

Topic: Mergers, amalgamation, and reorganization
Series: JULY 2023

AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

Question

Cradle Ltd, a company based in the United Kingdom, has proposed to acquire interest in Mamen Ltd, a company incorporated in Ghana and engaged in the sale of ceramics in Ghana. As part of Cradle Ltd’s investigation to acquire Mamen Ltd, the following financial indicators caught the attention of the management of Cradle Ltd:

The company has large staff numbers made up of fresh graduates and employees with enormous work experience.
There is a bad debt in the books of Mamen Ltd amounting to GH¢20 million.
The company has a financial cost from arbitrage arrangements amounting to GH¢14 million.
Tax loss unrelieved and unexpired was GH¢2 million.
According to the Accountant, carryover loss amounted to GH¢1 million.

Required:
Evaluate the tax impact of the above financial indicators on the operations of Cradle Ltd and advise the management of Cradle Ltd on how to reduce its tax exposure if any.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Carryover losses, Financial cost, Mergers and Acquisitions, Reorganization, Tax impact
Level: Level 3

Topic: Mergers, amalgamation, and reorganization
Series: JULY 2023

AT – May 2017 – L3 – Q3b – Business income – Corporate income tax

Compute allowable financial cost on hedged transactions and provide management advice on the tax implications.

Question

b) XYZ Ltd runs a business with a basis period from January to December each year. The following information is relevant to its business operations for 2016 year of assessment:

Item	Amount (GH¢)
Chargeable Income from business operations	40,000
Financial cost incurred on hedged transactions	150,000
Financial gain from hedged transactions	60,000

Required:

i) Compute the financial cost to be allowed in 2016 year of assessment. (6 marks)

ii) Advise management on the above results. (4 marks)
(Total: 10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable expenses, chargeable income, Corporate Tax, Financial cost, Hedging, Tax advice
Level: Level 3

Topic: Business income - Corporate income tax
Series: MAY 2017

TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

Question

a) Kaato Mining Company Ltd (Kaato) has been operating in the mining sector for some time now. The following data is relevant to the company’s operations for the 2017 year of assessment:

GH¢

Adjusted profit: 100,000,000
The following additional information is relevant:

ii) What is the tax treatment of financial cost under mineral operations? (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, Depreciation, Financial cost, Financial Gain, Mineral Royalty, Mining, Tax computation
Level: Level 3

Topic: Petroleum operations
Series: MAY 2019

AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

Question

The audit findings are as follows:

TAQA Department of Domestic Tax Revenue Division:
Corporate Tax GH¢230,000,000
VAT GH¢29,000,000
NHIL GH¢29,000,000
Withholding Tax (WHT) GH¢105,000,000

The management of Naagode Ltd has asked you to assess the chances of the Company if an objection to the assessment is raised as it considers the assessment quite excessive.

Required:
Recommend the process that the management should adopt to ensure success in its appeal.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, chargeable income, Financial cost, Ghana Revenue Authority, Objection process, Tax Compliance, Tax computation, Tax payable, Unrelieved loss, Withholding Tax
Level: Level 3

AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation

Advise on the tax implications of Japan Rocks acquiring 60% of shares in Konadu Yiadom Ltd.

Question

Required:
Advise Japan Rocks and its shareholders on the income tax implications of the acquisition of shares by Japan Rocks and the treatment of financial cost.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acquisition, Corporate Tax, Financial cost, Shareholding, Tax Loss
Level: Level 3

Topic: Mergers, amalgamation, and reorganization
Series: MAY 2021

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

Question

The company also has a parcel of land located at Abokobi which the company purchased three years ago at the cost of GH¢100,000. The current value of the land is GH¢500,000.

Required:
Advise Exclusif Homes Ghana Ltd on the following:

The income tax implications for the company if an investor acquires 51% of the company’s shares and the tax planning opportunities available which could reduce the income tax exposure of the company if an investor acquires 51% of the company’s shares.
Measures the acquirer can adopt to mitigate the tax effects (if any) of the proposed transaction.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Change in Ownership, Financial cost, Share Acquisition, Tax Loss, Tax Planning
Level: Level 3

Topic: Mergers, amalgamation, and reorganization
Series: JULY 2023

AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

Question

The company has large staff numbers made up of fresh graduates and employees with enormous work experience.
There is a bad debt in the books of Mamen Ltd amounting to GH¢20 million.
The company has a financial cost from arbitrage arrangements amounting to GH¢14 million.
Tax loss unrelieved and unexpired was GH¢2 million.
According to the Accountant, carryover loss amounted to GH¢1 million.

Required:
Evaluate the tax impact of the above financial indicators on the operations of Cradle Ltd and advise the management of Cradle Ltd on how to reduce its tax exposure if any.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Carryover losses, Financial cost, Mergers and Acquisitions, Reorganization, Tax impact
Level: Level 3

Topic: Mergers, amalgamation, and reorganization
Series: JULY 2023

AT – May 2017 – L3 – Q3b – Business income – Corporate income tax

Compute allowable financial cost on hedged transactions and provide management advice on the tax implications.

Question

b) XYZ Ltd runs a business with a basis period from January to December each year. The following information is relevant to its business operations for 2016 year of assessment:

Item	Amount (GH¢)
Chargeable Income from business operations	40,000
Financial cost incurred on hedged transactions	150,000
Financial gain from hedged transactions	60,000

Required:

i) Compute the financial cost to be allowed in 2016 year of assessment. (6 marks)

ii) Advise management on the above results. (4 marks)
(Total: 10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable expenses, chargeable income, Corporate Tax, Financial cost, Hedging, Tax advice
Level: Level 3

Topic: Business income - Corporate income tax
Series: MAY 2017

Question Tag: Financial cost

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TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation

Advise on the tax implications of Japan Rocks acquiring 60% of shares in Konadu Yiadom Ltd.

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

AT – May 2017 – L3 – Q3b – Business income – Corporate income tax

Compute allowable financial cost on hedged transactions and provide management advice on the tax implications.

TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation

Advise on the tax implications of Japan Rocks acquiring 60% of shares in Konadu Yiadom Ltd.

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

AT – May 2017 – L3 – Q3b – Business income – Corporate income tax

Compute allowable financial cost on hedged transactions and provide management advice on the tax implications.

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Question Tag: Financial cost

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TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

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AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

You're reporting an error for "AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning"

AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation

Advise on the tax implications of Japan Rocks acquiring 60% of shares in Konadu Yiadom Ltd.

You're reporting an error for "AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation"

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

You're reporting an error for "AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization"

AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

You're reporting an error for "AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization"

AT – May 2017 – L3 – Q3b – Business income – Corporate income tax

Compute allowable financial cost on hedged transactions and provide management advice on the tax implications.

You're reporting an error for "AT – May 2017 – L3 – Q3b – Business income – Corporate income tax"

TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

You're reporting an error for "TX – May 2019 – L3 – Q5a – Minerals and mining"

AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

You're reporting an error for "AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning"

AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation

Advise on the tax implications of Japan Rocks acquiring 60% of shares in Konadu Yiadom Ltd.

You're reporting an error for "AT – May 2021 – L3 – Q5b – Mergers, amalgamation and reorganisation"

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

You're reporting an error for "AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization"

AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

You're reporting an error for "AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization"

AT – May 2017 – L3 – Q3b – Business income – Corporate income tax

Compute allowable financial cost on hedged transactions and provide management advice on the tax implications.

You're reporting an error for "AT – May 2017 – L3 – Q3b – Business income – Corporate income tax"

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