Question Tag: Interest

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FA – Nov 2012 – L1 – SA – Q16 – Partnership Accounts

Determining when interest on partners’ capital is paid.

Question

When duties to be carried out by each partner are of equal value but the capital contributed is unequal, it is:

A. Unreasonable to pay interest on the partners’ capital out of profit
B. Reasonable to pay interest on the partners’ current account out of profit
C. Reasonable to pay interest on the partners’ loan account out of profit
D. Unreasonable to pay interest on the partners’ current account out of profit
E. Reasonable to pay interest on the partners’ capital out of partnership profit

Answer

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Tags: Capital, Interest, Partnership, Profit
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2012

CR – May 2020 – L3 – Q2b – Capitalization of Borrowing Costs

Question

Dompoase Ltd incurred the following borrowing costs during the financial year 2018:

GH¢’000
Overdraft interest	12
Foreign currency loan interest (correctly translated into GH¢)	84
Foreign currency loan exchange differences on capital	140

In addition, a three-year fixed-rate GH¢2 million loan was taken out on 1 January 2018 at 6.5%. A loan set-up fee was charged at GH¢20,000. This increased the effective interest rate on the loan to 6.88%.

Required:
Determine the maximum amount that could potentially be capitalized as borrowing costs during the period (assuming an asset was being financed using all available finance).

Answer

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Tags: Borrowing Costs, Capitalization, Foreign Currency Loan, Interest, Overdraft
Level: Level 3

Series: MAY 2020

BMF – May 2018 – L1 – SB – Q2c – Basics of Business Finance and Financial Markets

Explain briefly THREE of these remedies

Question

Agency conflicts are the differences in the interests of a company’s owners and managers. However, several remedies have been recommended to lessen this age-long managerial problem.
Explain briefly THREE of these remedies

Answer

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Tags: Agency Conflicts, Interest
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

FA – MAY 2015 – L1 – SA – Q17 – Partnership Accounts

Identify the interest rate applied to excess capital contributions in the absence of a partnership agreement.

Question

Where there is no partnership agreement, any capital contribution in excess of the agreed amount attracts:
A. No interest
B. Interest at the rate of 2 1/2% per annum
C. Interest at the rate of 5% per annum
D. Interest at the rate of 10% per annum
E. Interest at the rate of 20% per annum

Answer

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Tags: Capital, Interest, Partnership
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2015

QT – Nov 2016 – L1 – Q4b – Mathematics of Business Finance

Calculate the monthly amortization payments, total interest, and equity for a house loan at 9% interest over 25 years.

Question

Maame TorTor has just purchased a GH¢70,000.00 house and made a down payment of GH¢15,000.00.

Required:
i) Determine how much money is needed to amortize (i.e., pay monthly) the balance at a 9% interest rate compounded annually for 25 years. (5 marks)
ii) Determine the total interest for the 25 years. (2 marks)
iii) Determine after 20 years the equity she has in the house. (3 marks)

Answer

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Tags: Equity, Financial Calculations, Interest, Loan amortization
Level: Level 1

Topic: Mathematics of Business Finance
Series: NOV 2016

PT – Dec 2023 – L2 – Q4c – Corporate Tax Liabilities

Explanation of the conditions under which interest is deductible for tax purposes.

Question

Explain the conditions under which interest is deductible for tax purposes. (6 marks)

Answer

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Tags: Corporate Tax, Debt Obligation, Deductibility, Interest, Tax law
Level: Level 2

Topic: Corporate Tax Liabilities
Series: DEC 2023

PT – Nov 2020 – L2 – Q5c – Withholding Tax Administration

Compute withholding tax on interest payments received by a resident individual.

Question

Mike Kotex, a resident individual, received interest from the following:

Source	Amount (GH¢)
Resident Financial Institution	10,000
Pearl Micro-Finance	9,000
ABC Ltd – Oil Marketing Company	8,000

Required:
Compute the taxes payable on the payments to Mike Kotex and comment on the payment of interest by ABC Ltd to Mike Kotex. (4 marks)

Answer

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Tags: Financial Institutions, Interest, Resident Individual, Withholding Tax
Level: Level 2

Topic: Withholding Tax Administration
Series: NOV 2020

TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

Question

Agyemang Boateng has been working with Intellect Consult Limited (ICL) since 2010. At the beginning of January 2016, he was seconded to Accra Metropolitan Assembly (AMA) for a period of six months to be part of a team to spearhead a restructuring exercise and the review of the system of internal controls at the Revenue department of AMA.

Terms of the AMA engagement:

ICL was to be paid a one-off settlement of GH¢10,000 at the completion of the engagement as well as reimbursement of monthly operational expenses incurred based on submission of the relevant invoices.

Agyemang’s only entitlements from AMA were the following monthly allowances:

Inconvenience Allowance: GH¢300
Extra Duties Allowance: GH¢200
Agyemang’s secondment to AMA did not in any way affect his salary and other entitlements from his employer, ICL, as these continued to accrue to him during the period of the secondment.

Agyemang’s earnings and entitlements from ICL for the year of assessment ended 31 December 2016 are as follows:

Basic Salary: GH¢46,000
Bonus: GH¢9,500
Fuel allowance: GH¢1,750
Entertainment allowance: GH¢7,500
Additional Information:

Agyemang stays in a fully furnished ICL bungalow at East Legon in Accra. ICL charges him a rent of GH¢150 per month.
Agyemang makes use of ICL’s company vehicle, driver, and fuel for official use only.
On 1 January 2016, Agyemang successfully applied for a GH¢10,000 loan from his employer, ICL. His employer charged him interest of 2% per annum on the loan. During this period, Bank of Ghana policy rate was 15%. The loan was repayable within ten months.
On 1 October 2016, Agyemang commenced part-time lecturing in Accounting at a local private Senior High School. He was paid monthly for his services, and the total amount received for the three months ended 31 December 2016 was GH¢5,000 gross.
Agyemang’s other non-employment-related income received during the year ended 31 December 2016 were:

Net royalties received for his Accounting textbook: GH¢21,250
Gross local company dividends (Unquoted Company shares): GH¢13,000
Interest on Bank deposits from local financial institutions: GH¢10,000
Gross lottery winnings: GH¢12,000
Required:

i) Calculate Agyemang’s taxable income for the year ended 31 December 2016. (10 marks)

ii) State AMA’s tax obligation when making the disbursement of GH¢10,000 to ICL. (1 mark)

iii) What are the tax implications to Agyemang with respect to the following:

Part-time lecturing
Royalty
Dividends
Interest on bank deposit (2 marks)
iv) What is the tax implication of the loan taken by Agyemang? (1 mark)

Answer

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Tags: Dividends, Employment Income, Interest, Loans, Part-Time Income, Royalties, Taxable Income, Withholding Tax
Level: Level 3

Topic: Tax planning
Series: MAY 2019

CR – May 2016 – L3 – Q1b – Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)

Calculate borrowing costs to be capitalized for a warehouse construction project, considering specific loans and general borrowings.

Question

Nanniama Ltd is constructing a warehouse that will take about 18 months to complete. It began construction on 1st January 2014. The following payments were made during 2014:

GH¢’000 31st January 200 31st March 450 30th June 100 31st October 200 30th November 250

The first payment on 31st January was funded from the entity’s pool of debt. However, the entity succeeded in raising a medium-term loan for an amount of GH¢800,000 on 31st March, 2014, with simple interest of 9 percent per annum, calculated and payable monthly in arrears. These funds were specifically used for this construction. Excess funds were temporarily invested at 6 percent per annum monthly in arrears and payable in cash. The pool of debt was again used to an amount of GH¢200,000 for the payment on 30th November, which could not be funded from the medium-term loan. The construction project was temporarily halted for 3 weeks in May when substantial technical and administrative work was carried out.

Nanniama Ltd adopted the accounting policy of capitalizing borrowing costs. The following amounts of debt were outstanding at the balance sheet date, 31st December 2014:

GH¢’000 Medium-term loan (see description above) 800 Bank overdraft 1,200 (The weighted average amount outstanding during the year was GH¢750,000 and total interest charged by the bank amounted to GH¢33,800 for the year) A 10%, 7-year note dated 31st October 2018 with simple interest payable annually at 31st December 9,000

Required: Calculate the borrowing costs to be capitalized (10 marks)

Answer

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Tags: Borrowing Costs, Capitalization, Construction, IAS 23, Interest
Level: Level 3

Topic: Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)
Series: MAY 2016

AT – July 2023 – L3 – Q1a – International taxation

Analyzing the tax implications of share capital, loan interest, revaluation reserves, and thin capitalization

Question

On 1 January 2022, Frost Ltd based in the United States of America acquired 100% shares in Nzungu Ltd in the Gambia. Also, Nzungu Ltd acquired 60% shares in Gyakye Ltd in Ghana.

Frost Ltd granted a loan equivalent of GH¢100 million to Nzungu Ltd. The loan was subsequently passed on to Gyakye Ltd in Ghana to strengthen its capital structure.

The interest equivalent on the loan from Frost Ltd to Nzungu Ltd was GH¢6,000,000. Gyakye Ltd ended up paying GH¢8,000,000 as interest to Nzungu Ltd. The difference in interest payment was a service charge for the role played in transferring the loan to Ghana by Nzunga.

Gyakye Ltd has the following extracts from its Statement of Financial Position as at 2022:

Required:
Evaluate the tax implications of the following:

The movement in the Share Capital.
The loan interest paid.
The movement in the retained earnings.
The movement in the revaluation reserves.
Thin capitalization implications from the above.

Answer

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Tags: Capital structure, Interest, International Taxation, Loan, Thin Capitalization
Level: Level 3

Topic: International taxation
Series: JULY 2023

FA – Nov 2012 – L1 – SA – Q16 – Partnership Accounts

Determining when interest on partners’ capital is paid.

Question

When duties to be carried out by each partner are of equal value but the capital contributed is unequal, it is:

Answer

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Tags: Capital, Interest, Partnership, Profit
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2012

CR – May 2020 – L3 – Q2b – Capitalization of Borrowing Costs

Question

Dompoase Ltd incurred the following borrowing costs during the financial year 2018:

GH¢’000
Overdraft interest	12
Foreign currency loan interest (correctly translated into GH¢)	84
Foreign currency loan exchange differences on capital	140

Required:
Determine the maximum amount that could potentially be capitalized as borrowing costs during the period (assuming an asset was being financed using all available finance).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing Costs, Capitalization, Foreign Currency Loan, Interest, Overdraft
Level: Level 3

Series: MAY 2020

BMF – May 2018 – L1 – SB – Q2c – Basics of Business Finance and Financial Markets

Explain briefly THREE of these remedies

Question

Answer

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Tags: Agency Conflicts, Interest
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

FA – MAY 2015 – L1 – SA – Q17 – Partnership Accounts

Identify the interest rate applied to excess capital contributions in the absence of a partnership agreement.

Question

Answer

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Tags: Capital, Interest, Partnership
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2015

QT – Nov 2016 – L1 – Q4b – Mathematics of Business Finance

Calculate the monthly amortization payments, total interest, and equity for a house loan at 9% interest over 25 years.

Question

Maame TorTor has just purchased a GH¢70,000.00 house and made a down payment of GH¢15,000.00.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Equity, Financial Calculations, Interest, Loan amortization
Level: Level 1

Topic: Mathematics of Business Finance
Series: NOV 2016

PT – Dec 2023 – L2 – Q4c – Corporate Tax Liabilities

Explanation of the conditions under which interest is deductible for tax purposes.

Question

Explain the conditions under which interest is deductible for tax purposes. (6 marks)

Answer

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Tags: Corporate Tax, Debt Obligation, Deductibility, Interest, Tax law
Level: Level 2

Topic: Corporate Tax Liabilities
Series: DEC 2023

PT – Nov 2020 – L2 – Q5c – Withholding Tax Administration

Compute withholding tax on interest payments received by a resident individual.

Question

Mike Kotex, a resident individual, received interest from the following:

Source	Amount (GH¢)
Resident Financial Institution	10,000
Pearl Micro-Finance	9,000
ABC Ltd – Oil Marketing Company	8,000

Required:
Compute the taxes payable on the payments to Mike Kotex and comment on the payment of interest by ABC Ltd to Mike Kotex. (4 marks)

Answer

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Tags: Financial Institutions, Interest, Resident Individual, Withholding Tax
Level: Level 2

Topic: Withholding Tax Administration
Series: NOV 2020

TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

Question

Terms of the AMA engagement:

Agyemang’s only entitlements from AMA were the following monthly allowances:

Agyemang’s earnings and entitlements from ICL for the year of assessment ended 31 December 2016 are as follows:

Basic Salary: GH¢46,000
Bonus: GH¢9,500
Fuel allowance: GH¢1,750
Entertainment allowance: GH¢7,500
Additional Information:

i) Calculate Agyemang’s taxable income for the year ended 31 December 2016. (10 marks)

ii) State AMA’s tax obligation when making the disbursement of GH¢10,000 to ICL. (1 mark)

iii) What are the tax implications to Agyemang with respect to the following:

Part-time lecturing
Royalty
Dividends
Interest on bank deposit (2 marks)
iv) What is the tax implication of the loan taken by Agyemang? (1 mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Dividends, Employment Income, Interest, Loans, Part-Time Income, Royalties, Taxable Income, Withholding Tax
Level: Level 3

Topic: Tax planning
Series: MAY 2019

CR – May 2016 – L3 – Q1b – Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)

Calculate borrowing costs to be capitalized for a warehouse construction project, considering specific loans and general borrowings.

Question

Nanniama Ltd is constructing a warehouse that will take about 18 months to complete. It began construction on 1st January 2014. The following payments were made during 2014:

GH¢’000 31st January 200 31st March 450 30th June 100 31st October 200 30th November 250

Nanniama Ltd adopted the accounting policy of capitalizing borrowing costs. The following amounts of debt were outstanding at the balance sheet date, 31st December 2014:

Required: Calculate the borrowing costs to be capitalized (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing Costs, Capitalization, Construction, IAS 23, Interest
Level: Level 3

Topic: Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)
Series: MAY 2016

AT – July 2023 – L3 – Q1a – International taxation

Analyzing the tax implications of share capital, loan interest, revaluation reserves, and thin capitalization

Question

On 1 January 2022, Frost Ltd based in the United States of America acquired 100% shares in Nzungu Ltd in the Gambia. Also, Nzungu Ltd acquired 60% shares in Gyakye Ltd in Ghana.

Frost Ltd granted a loan equivalent of GH¢100 million to Nzungu Ltd. The loan was subsequently passed on to Gyakye Ltd in Ghana to strengthen its capital structure.

Gyakye Ltd has the following extracts from its Statement of Financial Position as at 2022:

Required:
Evaluate the tax implications of the following:

The movement in the Share Capital.
The loan interest paid.
The movement in the retained earnings.
The movement in the revaluation reserves.
Thin capitalization implications from the above.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital structure, Interest, International Taxation, Loan, Thin Capitalization
Level: Level 3

Topic: International taxation
Series: JULY 2023

Question Tag: Interest

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FA – Nov 2012 – L1 – SA – Q16 – Partnership Accounts

Determining when interest on partners’ capital is paid.

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CR – May 2020 – L3 – Q2b – Capitalization of Borrowing Costs

Required: Determine the maximum amount that could potentially be capitalized as borrowing costs during the period (assuming an asset was being financed using all available finance).

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BMF – May 2018 – L1 – SB – Q2c – Basics of Business Finance and Financial Markets

Explain briefly THREE of these remedies

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FA – MAY 2015 – L1 – SA – Q17 – Partnership Accounts

Identify the interest rate applied to excess capital contributions in the absence of a partnership agreement.

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QT – Nov 2016 – L1 – Q4b – Mathematics of Business Finance

Calculate the monthly amortization payments, total interest, and equity for a house loan at 9% interest over 25 years.

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PT – Dec 2023 – L2 – Q4c – Corporate Tax Liabilities

Explanation of the conditions under which interest is deductible for tax purposes.

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PT – Nov 2020 – L2 – Q5c – Withholding Tax Administration

Compute withholding tax on interest payments received by a resident individual.

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TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

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CR – May 2016 – L3 – Q1b – Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)

Calculate borrowing costs to be capitalized for a warehouse construction project, considering specific loans and general borrowings.

You're reporting an error for "CR – May 2016 – L3 – Q1b – Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)"

AT – July 2023 – L3 – Q1a – International taxation

Analyzing the tax implications of share capital, loan interest, revaluation reserves, and thin capitalization

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FA – Nov 2012 – L1 – SA – Q16 – Partnership Accounts

Determining when interest on partners’ capital is paid.

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CR – May 2020 – L3 – Q2b – Capitalization of Borrowing Costs

Required: Determine the maximum amount that could potentially be capitalized as borrowing costs during the period (assuming an asset was being financed using all available finance).

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BMF – May 2018 – L1 – SB – Q2c – Basics of Business Finance and Financial Markets

Explain briefly THREE of these remedies

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FA – MAY 2015 – L1 – SA – Q17 – Partnership Accounts

Identify the interest rate applied to excess capital contributions in the absence of a partnership agreement.

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QT – Nov 2016 – L1 – Q4b – Mathematics of Business Finance

Calculate the monthly amortization payments, total interest, and equity for a house loan at 9% interest over 25 years.

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PT – Dec 2023 – L2 – Q4c – Corporate Tax Liabilities

Explanation of the conditions under which interest is deductible for tax purposes.

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PT – Nov 2020 – L2 – Q5c – Withholding Tax Administration

Compute withholding tax on interest payments received by a resident individual.

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TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

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CR – May 2016 – L3 – Q1b – Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)

Calculate borrowing costs to be capitalized for a warehouse construction project, considering specific loans and general borrowings.

You're reporting an error for "CR – May 2016 – L3 – Q1b – Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)"

AT – July 2023 – L3 – Q1a – International taxation

Analyzing the tax implications of share capital, loan interest, revaluation reserves, and thin capitalization

You're reporting an error for "AT – July 2023 – L3 – Q1a – International taxation"

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Required:
Determine the maximum amount that could potentially be capitalized as borrowing costs during the period (assuming an asset was being financed using all available finance).

Required:
Determine the maximum amount that could potentially be capitalized as borrowing costs during the period (assuming an asset was being financed using all available finance).