Question Tag: Manufacturing

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  • 15 Marks

TAX – May 2024 – L2 – SA – Q5 – Value Added Tax (VAT)

Compute VAT payable by Havillah Manufacturing Limited and identify VAT-exempt goods and services.

Havillah Manufacturing Limited, engaged in manufacturing perfumes and other cosmetic products, has the following profit or loss statement for the year ended September 30, 2021:

Additional Information:

  1. Turnover includes N64,350,000 from export sales and N141,900,000 from local sales.
  2. Cost of Sales includes:
    • Opening inventory (VAT inclusive): N24,915,000
    • Closing inventory (VAT inclusive): N40,865,000
    • Purchase of raw materials: N94,600,000
    • Freight charges: N20,570,000
    • Other direct materials: N13,530,000
  3. Plant and machinery purchased for N24,750,000 is included in opening inventory, VAT inclusive.
  4. VAT and withholding tax remitted during the year amounted to N2,173,180 and N1,787,500, respectively.

Required: a. Compute the net VAT payable by Havillah Manufacturing Limited for the year. (10 Marks)
b. State FIVE VAT-exempt goods. (2½ Marks)
c. State FIVE VAT-exempt services. (2½ Marks)

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  • 11 Marks

TAX – Nov 2020 – L1 – SA – Q2a – Companies Income Tax (CIT)

Compute the income tax liability for three companies based on their total profits and provide reasons.

Alhaji Jimoh Abdulahi retired from public service in 2010 and went into business. His friend advised him to incorporate some companies.

The following information in respect of the companies is provided:

Name of Company Apex Manufacturing Co. Limited Zenith Foods Limited Base Nigeria Limited
Date of Commencement of Business January 2, 2010 January 2, 2017 January 2, 2017
Nature of Business Manufacturing Agriculture Trading
Date of Accounts Year ended December 31, 2018 Year ended December 31, 2018 Year ended December 31, 2018
Revenue (N) 990,400 896,400 900,500
Total Profit (N) 384,000 421,000 396,000

Required:
Compute the income tax liability of each of the companies for the relevant assessment year. Give reasons for your computations.
(11 Marks)

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  • 9 Marks

TAX – Nov 2021 – L2 – Q3a – Value Added Tax (VAT)

Calculation of total VAT payable by Adegboyega Enterprises to the Federal Inland Revenue Service (FIRS) for product sales.

Adegboyega Enterprise is a manufacturing outfit based in Jankara, Lagos State. In 2020, the company sold its vatable product to a wholesaler, Ikeja Venture, for N3,500,000. The wholesaler sold the products to a retailer, Mrs. Adeosun, for N4,900,000, who finally sold it to consumers for N6,300,000 (VAT inclusive). Assume there was no closing inventory at each stage of the transaction.

Required:
a. Compute the total VAT payable to the Federal Inland Revenue Service by Adegboyega Enterprises on the transactions stated above.

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  • 1 Marks

FA – May 2014 – L1 – SA – Q15 – Cost Classification

This question tests knowledge of classifying costs in a manufacturing context.

For your organisation which is engaged in the production of industrial blocks, bricks and construction, where would you classify the remuneration of a forklift truck operator and the cost of steel girders?

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  • 1 Marks

BMF – May 2021 – L1 – SA – Q7 – Basic Management Functions

Identifies which activity does not belong to the manufacturing function in an organization.

Which of the following activities may NOT be taken as part of manufacturing function in an organization?
A. Engineering and maintenance work
B. Physical delivery of goods to customers
C. Production planning and control
D. Quality control and checking
E. Inspection of finished goods

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  • 1 Marks

MI – Nov 2019 – L1 – SA – Q7 – Costing Methods

This question asks for the system designed to suit the way goods are manufactured or services are provided.

The system designed to suit the ways goods are manufactured or processed or the way services are provided is referred to as:
A. Job costing
B. Specific order costing
C. Costing methods
D. Process costing
E. Batch costing

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  • 5 Marks

PT – May 2021 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Discuss how location benefits young entrepreneurs aged 35 years or younger in manufacturing regarding tax planning.

The location of an entity is of importance in tax planning. How does location inure to the benefit of a young entrepreneur aged 35 years or younger in the manufacturing business?

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  • 10 Marks

PT – Dec 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Conditions VAT-registered manufacturing companies must meet for VAT relief on imported raw materials.

According to section (38) of the Value Added Tax Act, 2013 (Act 870), the Minister may by legislative instrument make regulations to grant relief from tax on taxable imports of goods or taxable supplies of goods acquired in the country to the persons specified in the Third Schedule.

Required:
State FOUR (4) conditions that must be satisfied by VAT-registered manufacturing companies before they are granted upfront relief of VAT and levies on imported raw materials. (10 marks)

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  • 14 Marks

TF – May 2018 – L3 – Q2a – Capital Allowance

Calculate the capital allowances and chargeable income of Sekyiwaa Annam Industries Ltd for the year 2017.

Sekyiwaa Annam Industries Limited manufactures personal hygiene soaps and related products at their factory in Takoradi. The company commenced business operations on 1 April 2016 and had an assessed loss of GH¢150,200 for the period ended 31 December 2016.

The company recorded a net profit of GH¢762,800 for the year ended 31 December 2017 after taking into account the following transactions in the income statement:

Gross rental income of GH¢180,000 received from the leasing of one wing of the office building. The rental income portion constitutes 10% of the office building.
Net interest received on bank deposits from Ghana Commercial Bank of GH¢10,028. Withholding tax of 8% has been deducted.
The registration of Trademarks at a total cost of GH¢75,000 in respect of the Company’s personal hygiene soaps that is to last for 10 years. The research and development expenses incurred in connection with these soaps amounted to GH¢15,000 and the company intends to expense it. The legal costs incurred to complete the registration of the Trademark was GH¢5,000.
A donation of GH¢120,000 worth of furniture was made to a local government-assisted school as part of the Company’s corporate social responsibility program, which was duly acknowledged by Ghana Education Service (GES).
Depreciation of fixed assets of GH¢57,000.
Replacement of two motor vehicle engines costing GH¢51,000.
Exceptional costs amounting to GH¢150,000 as a result of the production manager sustaining an injury while working on one of the production lines in the factory. GH¢35,000 of the costs relate to a payment made to the production manager as severance pay. GH¢110,000 was used to acquire additional computers. The remaining GH¢5,000 of the costs represent fines imposed by the Factory Inspectorate Department of the government following the incident.
Purchases of a Computer Server for accounting and human resource needs at a cost of GH¢20,000.
Additional Information:
Details of the Company’s other fixed assets, at cost, are provided below. These were all acquired/constructed during the year to 31 December 2016:

Asset Cost (GH¢)
Factory Building 800,000
Plant and Machinery 510,000
Office Building 420,000
Furniture and Office Equipment 60,000
Motor vehicles (Goods Vans) 130,000
Computers 30,000

Required:
i) Calculate the capital allowances claimable by Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 using all the available information.
(8 marks)

ii) Calculate the chargeable income of Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 and the tax payable.
(6 marks)

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  • 10 Marks

AT – Mar 2024 – L3 – Q2c – Business income – Corporate income tax

Evaluating the tax benefits of manufacturing ceramics using local and foreign materials versus importing finished ceramics.

Talantula Ltd has engaged you as an ICAG final level candidate on the options that would provide enormous benefits to them and also to the government. The two options are:

  • To manufacture ceramics using both local and foreign materials. The products will be sold locally and on the international market.
  • To import finished ceramics for sale in Ghana.

Required:
Evaluate FIVE (5) tax benefits of either of the business options you will want them to associate with over the other.

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  • 15 Marks

TAX – May 2024 – L2 – SA – Q5 – Value Added Tax (VAT)

Compute VAT payable by Havillah Manufacturing Limited and identify VAT-exempt goods and services.

Havillah Manufacturing Limited, engaged in manufacturing perfumes and other cosmetic products, has the following profit or loss statement for the year ended September 30, 2021:

Additional Information:

  1. Turnover includes N64,350,000 from export sales and N141,900,000 from local sales.
  2. Cost of Sales includes:
    • Opening inventory (VAT inclusive): N24,915,000
    • Closing inventory (VAT inclusive): N40,865,000
    • Purchase of raw materials: N94,600,000
    • Freight charges: N20,570,000
    • Other direct materials: N13,530,000
  3. Plant and machinery purchased for N24,750,000 is included in opening inventory, VAT inclusive.
  4. VAT and withholding tax remitted during the year amounted to N2,173,180 and N1,787,500, respectively.

Required: a. Compute the net VAT payable by Havillah Manufacturing Limited for the year. (10 Marks)
b. State FIVE VAT-exempt goods. (2½ Marks)
c. State FIVE VAT-exempt services. (2½ Marks)

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  • 11 Marks

TAX – Nov 2020 – L1 – SA – Q2a – Companies Income Tax (CIT)

Compute the income tax liability for three companies based on their total profits and provide reasons.

Alhaji Jimoh Abdulahi retired from public service in 2010 and went into business. His friend advised him to incorporate some companies.

The following information in respect of the companies is provided:

Name of Company Apex Manufacturing Co. Limited Zenith Foods Limited Base Nigeria Limited
Date of Commencement of Business January 2, 2010 January 2, 2017 January 2, 2017
Nature of Business Manufacturing Agriculture Trading
Date of Accounts Year ended December 31, 2018 Year ended December 31, 2018 Year ended December 31, 2018
Revenue (N) 990,400 896,400 900,500
Total Profit (N) 384,000 421,000 396,000

Required:
Compute the income tax liability of each of the companies for the relevant assessment year. Give reasons for your computations.
(11 Marks)

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  • 9 Marks

TAX – Nov 2021 – L2 – Q3a – Value Added Tax (VAT)

Calculation of total VAT payable by Adegboyega Enterprises to the Federal Inland Revenue Service (FIRS) for product sales.

Adegboyega Enterprise is a manufacturing outfit based in Jankara, Lagos State. In 2020, the company sold its vatable product to a wholesaler, Ikeja Venture, for N3,500,000. The wholesaler sold the products to a retailer, Mrs. Adeosun, for N4,900,000, who finally sold it to consumers for N6,300,000 (VAT inclusive). Assume there was no closing inventory at each stage of the transaction.

Required:
a. Compute the total VAT payable to the Federal Inland Revenue Service by Adegboyega Enterprises on the transactions stated above.

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  • 1 Marks

FA – May 2014 – L1 – SA – Q15 – Cost Classification

This question tests knowledge of classifying costs in a manufacturing context.

For your organisation which is engaged in the production of industrial blocks, bricks and construction, where would you classify the remuneration of a forklift truck operator and the cost of steel girders?

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  • 1 Marks

BMF – May 2021 – L1 – SA – Q7 – Basic Management Functions

Identifies which activity does not belong to the manufacturing function in an organization.

Which of the following activities may NOT be taken as part of manufacturing function in an organization?
A. Engineering and maintenance work
B. Physical delivery of goods to customers
C. Production planning and control
D. Quality control and checking
E. Inspection of finished goods

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  • 1 Marks

MI – Nov 2019 – L1 – SA – Q7 – Costing Methods

This question asks for the system designed to suit the way goods are manufactured or services are provided.

The system designed to suit the ways goods are manufactured or processed or the way services are provided is referred to as:
A. Job costing
B. Specific order costing
C. Costing methods
D. Process costing
E. Batch costing

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  • 5 Marks

PT – May 2021 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Discuss how location benefits young entrepreneurs aged 35 years or younger in manufacturing regarding tax planning.

The location of an entity is of importance in tax planning. How does location inure to the benefit of a young entrepreneur aged 35 years or younger in the manufacturing business?

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  • 10 Marks

PT – Dec 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Conditions VAT-registered manufacturing companies must meet for VAT relief on imported raw materials.

According to section (38) of the Value Added Tax Act, 2013 (Act 870), the Minister may by legislative instrument make regulations to grant relief from tax on taxable imports of goods or taxable supplies of goods acquired in the country to the persons specified in the Third Schedule.

Required:
State FOUR (4) conditions that must be satisfied by VAT-registered manufacturing companies before they are granted upfront relief of VAT and levies on imported raw materials. (10 marks)

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  • 14 Marks

TF – May 2018 – L3 – Q2a – Capital Allowance

Calculate the capital allowances and chargeable income of Sekyiwaa Annam Industries Ltd for the year 2017.

Sekyiwaa Annam Industries Limited manufactures personal hygiene soaps and related products at their factory in Takoradi. The company commenced business operations on 1 April 2016 and had an assessed loss of GH¢150,200 for the period ended 31 December 2016.

The company recorded a net profit of GH¢762,800 for the year ended 31 December 2017 after taking into account the following transactions in the income statement:

Gross rental income of GH¢180,000 received from the leasing of one wing of the office building. The rental income portion constitutes 10% of the office building.
Net interest received on bank deposits from Ghana Commercial Bank of GH¢10,028. Withholding tax of 8% has been deducted.
The registration of Trademarks at a total cost of GH¢75,000 in respect of the Company’s personal hygiene soaps that is to last for 10 years. The research and development expenses incurred in connection with these soaps amounted to GH¢15,000 and the company intends to expense it. The legal costs incurred to complete the registration of the Trademark was GH¢5,000.
A donation of GH¢120,000 worth of furniture was made to a local government-assisted school as part of the Company’s corporate social responsibility program, which was duly acknowledged by Ghana Education Service (GES).
Depreciation of fixed assets of GH¢57,000.
Replacement of two motor vehicle engines costing GH¢51,000.
Exceptional costs amounting to GH¢150,000 as a result of the production manager sustaining an injury while working on one of the production lines in the factory. GH¢35,000 of the costs relate to a payment made to the production manager as severance pay. GH¢110,000 was used to acquire additional computers. The remaining GH¢5,000 of the costs represent fines imposed by the Factory Inspectorate Department of the government following the incident.
Purchases of a Computer Server for accounting and human resource needs at a cost of GH¢20,000.
Additional Information:
Details of the Company’s other fixed assets, at cost, are provided below. These were all acquired/constructed during the year to 31 December 2016:

Asset Cost (GH¢)
Factory Building 800,000
Plant and Machinery 510,000
Office Building 420,000
Furniture and Office Equipment 60,000
Motor vehicles (Goods Vans) 130,000
Computers 30,000

Required:
i) Calculate the capital allowances claimable by Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 using all the available information.
(8 marks)

ii) Calculate the chargeable income of Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 and the tax payable.
(6 marks)

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  • 10 Marks

AT – Mar 2024 – L3 – Q2c – Business income – Corporate income tax

Evaluating the tax benefits of manufacturing ceramics using local and foreign materials versus importing finished ceramics.

Talantula Ltd has engaged you as an ICAG final level candidate on the options that would provide enormous benefits to them and also to the government. The two options are:

  • To manufacture ceramics using both local and foreign materials. The products will be sold locally and on the international market.
  • To import finished ceramics for sale in Ghana.

Required:
Evaluate FIVE (5) tax benefits of either of the business options you will want them to associate with over the other.

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