Reorganization – NBC Institute

PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains

Explanation of the tax treatment for the realization of assets in the event of a merger, amalgamation, or reorganization.

Question

Explain the realization of an asset by way of merger, amalgamation, or reorganization under section 47 of Income Tax Act, 2015 (Act 896). (5 marks)

Answer

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Tags: Amalgamation, Asset Realization, Capital Gains, Income Tax Act, Merger, Reorganization
Level: Level 2

Topic: Taxation of Capital Gains
Series: DEC 2023

CR – Nov 2016 – L3 – Q3 – Corporate reconstruction and reorganization

Prepare the capital reduction, stated capital, and bank accounts along with a statement of financial position after reorganization.

Question

MM Ltd, producers of telecommunication equipment, has been making losses in recent times. The directors have proposed a scheme of reorganization to take effect on 1 October 2013. The statement of financial position of the company at 30 September 2013 is as follows:

Statement of Financial Position as at 30 September 2013

Additional information:

The ordinary shares are to be written down to GH¢0.25 per share and then converted into new ordinary shares of GH¢1.00, fully paid.
The preference shareholders are to receive 40,000 ordinary shares of GH¢1.00 per share, fully paid in exchange for their preference shares.
Dividends on the 7% preference shares are two years in arrears. In consideration of waiving their rights to arrears of preference dividends, the preference shareholders have agreed to accept 10,000 new ordinary shares of GH¢1.00 per share, fully paid, in final settlement.
The creditors have agreed to take 100,000 new ordinary shares of GH¢1.00 per share, fully paid in part settlement of the amounts due to them.
The balance on the retained earnings account is to be written off.
Some assets of the company have been revalued and are to be incorporated into the accounts as follows:
- Freehold premises: GH¢100,000
- Plant and equipment: GH¢125,000
- Vehicles: GH¢25,000
- Inventory: GH¢36,000
An allowance of GH¢3,500 is to be made for doubtful debts.
The ordinary shareholders have agreed to inject an additional GH¢90,000 cash by acquiring 120,000 ordinary shares at GH¢0.75 per share, fully paid.
Reorganization costs amounted to GH¢7,500.

Required:
a) Prepare the capital reduction account, stated capital account, and bank account. (9 marks)
b) Prepare the statement of financial position of MM Ltd as at 1 October 2016, after the reorganization. (6 marks)

Answer

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Tags: Capital Reduction, Financial Position, Reorganization, Stated Capital
Level: Level 3

Topic: Corporate reconstruction and reorganisation
Series: NOV 2016

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

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

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

AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability

Explain the auditor's responsibility in relation to a reorganization that occurred after the year-end.

Question

Asogli recently announced its plans to reorganize its business operations. This will involve closing some units, retraining some existing staff, and disposing of some surplus assets. These plans were agreed upon at a board meeting in October and announced to their shareholders on 29 October 2020. Asogli is proposing to make a reorganization provision in the financial statements.

Required: Assume that the reorganization occurred on 15 November 2020, what will be the responsibility of the auditor in line with auditing standards? (5 marks)

Answer

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Tags: Audit Responsibility, ISA 560, Reorganization, Subsequent Events
Level: Level 3

Topic: Professional responsibility and liability
Series: APR 2022

PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains

Explanation of the tax treatment for the realization of assets in the event of a merger, amalgamation, or reorganization.

Question

Explain the realization of an asset by way of merger, amalgamation, or reorganization under section 47 of Income Tax Act, 2015 (Act 896). (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Amalgamation, Asset Realization, Capital Gains, Income Tax Act, Merger, Reorganization
Level: Level 2

Topic: Taxation of Capital Gains
Series: DEC 2023

CR – Nov 2016 – L3 – Q3 – Corporate reconstruction and reorganization

Prepare the capital reduction, stated capital, and bank accounts along with a statement of financial position after reorganization.

Question

Statement of Financial Position as at 30 September 2013

Additional information:

The ordinary shares are to be written down to GH¢0.25 per share and then converted into new ordinary shares of GH¢1.00, fully paid.
The preference shareholders are to receive 40,000 ordinary shares of GH¢1.00 per share, fully paid in exchange for their preference shares.
Dividends on the 7% preference shares are two years in arrears. In consideration of waiving their rights to arrears of preference dividends, the preference shareholders have agreed to accept 10,000 new ordinary shares of GH¢1.00 per share, fully paid, in final settlement.
The creditors have agreed to take 100,000 new ordinary shares of GH¢1.00 per share, fully paid in part settlement of the amounts due to them.
The balance on the retained earnings account is to be written off.
Some assets of the company have been revalued and are to be incorporated into the accounts as follows:
- Freehold premises: GH¢100,000
- Plant and equipment: GH¢125,000
- Vehicles: GH¢25,000
- Inventory: GH¢36,000
An allowance of GH¢3,500 is to be made for doubtful debts.
The ordinary shareholders have agreed to inject an additional GH¢90,000 cash by acquiring 120,000 ordinary shares at GH¢0.75 per share, fully paid.
Reorganization costs amounted to GH¢7,500.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Reduction, Financial Position, Reorganization, Stated Capital
Level: Level 3

Topic: Corporate reconstruction and reorganisation
Series: NOV 2016

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

AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability

Explain the auditor's responsibility in relation to a reorganization that occurred after the year-end.

Question

Required: Assume that the reorganization occurred on 15 November 2020, what will be the responsibility of the auditor in line with auditing standards? (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Responsibility, ISA 560, Reorganization, Subsequent Events
Level: Level 3

Topic: Professional responsibility and liability
Series: APR 2022

Question Tag: Reorganization

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PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains

Explanation of the tax treatment for the realization of assets in the event of a merger, amalgamation, or reorganization.

CR – Nov 2016 – L3 – Q3 – Corporate reconstruction and reorganization

Prepare the capital reduction, stated capital, and bank accounts along with a statement of financial position after reorganization.

Additional information:

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

AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability

Explain the auditor's responsibility in relation to a reorganization that occurred after the year-end.

PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains

Explanation of the tax treatment for the realization of assets in the event of a merger, amalgamation, or reorganization.

CR – Nov 2016 – L3 – Q3 – Corporate reconstruction and reorganization

Prepare the capital reduction, stated capital, and bank accounts along with a statement of financial position after reorganization.

Additional information:

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

AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability

Explain the auditor's responsibility in relation to a reorganization that occurred after the year-end.

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Question Tag: Reorganization

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PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains

Explanation of the tax treatment for the realization of assets in the event of a merger, amalgamation, or reorganization.

You're reporting an error for "PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains"

CR – Nov 2016 – L3 – Q3 – Corporate reconstruction and reorganization

Prepare the capital reduction, stated capital, and bank accounts along with a statement of financial position after reorganization.

Additional information:

You're reporting an error for "CR – Nov 2016 – L3 – Q3 – Corporate reconstruction 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"

AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability

Explain the auditor's responsibility in relation to a reorganization that occurred after the year-end.

You're reporting an error for "AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability"

PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains

Explanation of the tax treatment for the realization of assets in the event of a merger, amalgamation, or reorganization.

You're reporting an error for "PT – Dec 2023 – L2 – Q5d – Taxation of Capital Gains"

CR – Nov 2016 – L3 – Q3 – Corporate reconstruction and reorganization

Prepare the capital reduction, stated capital, and bank accounts along with a statement of financial position after reorganization.

Additional information:

You're reporting an error for "CR – Nov 2016 – L3 – Q3 – Corporate reconstruction 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"

AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability

Explain the auditor's responsibility in relation to a reorganization that occurred after the year-end.

You're reporting an error for "AAA – April 2022 – L3 – Q5b(ii) – Professional responsibility and liability"

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