- 12 Marks
AT – Nov 2020 – L3 – Q4a – Business income, Corporate income tax
Compute the tax payable by Kaka Ltd for the 2019 year of assessment, including capital allowances, fresh graduate incentives, and royalties.
Question
Kaka Ltd is a mining company that has been operating in Ghana for some time now. The following relates to Kaka Ltd’s 2019 year of assessment:
| Description | Amount (GH¢) |
|---|---|
| Revenue | 10,200,000 |
| Cost | 4,000,000 |
| Profit | 6,200,000 |
The following additional information is relevant and has been adjusted in arriving at the profit stated above:
- Depreciation, depletion, and amortization: GH¢2,000,000.
- Cost incurred in overburden stripping and shaft sinking during production to improve access amounted to GH¢800,000.
- Contribution towards a worthwhile cause is GH¢10,000. This was in support of a hole-in-heart child, duly acknowledged by the Ghana Health Service.
- Royalty of GH¢80,000 was paid without recourse to the revenue from production.
Additional information:
- An asset (Capital Asset) acquired in 2016 for GH¢1,000,000 was sold for GH¢200,000 in 2019.
- Capital allowance (written down value brought forward) on the assets as of 31 December 2018 was GH¢4,000,000.
- 10 fresh graduates were recruited in the 2019 year of assessment; 4 of them completed universities in the USA, while the others completed the University for Development Studies in Ghana. They were paid GH¢120,000 as salaries. The total workforce for 2019 was 60 employees.
Required: i) Compute the tax payable by Kaka Ltd.
(10 marks)
ii) The mining company indicated that it had an idle cash of GH¢100,000. If it adds it to its working capital, an additional income of GH¢10,000 would accrue but with an option to purchase Treasury Bills, the interest would remain at GH¢10,000.
Required:
Advise Management on the tax implication of the proposed investment.
(2 marks)
Find Related Questions by Tags, levels, etc.
Report an error