Retail Operations – NBC Institute

AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

Question

The following relates to the financial records of Konadu Yiadom Company Ltd submitted to the Ghana Revenue Authority for the year ended 31 December 2021. The company is into retail operations.

Notes:

The sales figure includes GH¢21,500 from the sale of old shop fittings which were replaced by new fittings during the year. The profit on the sale of the shop fittings was GH¢3,770.
Following completion of the accounts, the accountant received an invoice dated 14 December 2021 in respect of goods for resale, which were delivered in late December. This invoice was not recorded, and you have been informed that the total amount on the invoice, including VAT, was GH¢15,110. VAT included on the invoice was GH¢440. All levies are inclusive.
In June 2021, the company recognized the need to offer a special after-sales service to its customers. The company hired a new staff member and purchased a machine costing GH¢3,500 for the purpose. The local district assembly provided a grant to aid the purchase of the machine to the tune of GH¢1,250. The company included the cost of the machine in the purchases figure.
Staff cost is the total wages and salaries paid to the staff. GH¢37,000 was paid to fresh graduates employed during the year. They constitute 4% of the total workforce for the year 2021.
Promotion and Advertising is made up of:
- Managing Director’s wedding reception: GH¢2,800
- Refreshment during the opening of a new shop: GH¢5,000
- Sample product to invited guests during the opening of the new shop: GH¢3,510
Interest and Bank Payments are made up of:
- Interest on loan used to purchase stock for the business: GH¢3,020
- Overdraft interest on the business account: GH¢7,100
Legal Fees are made up of:
- Court fine resulting from traffic accident: GH¢3,950
- Defense of company driver for careless driving: GH¢3,830
- Litigation on business plot of land (90% chance of success): GH¢5,130
Bad Debts are made up of:
- Debt collection (Pursuing bad debts): GH¢455
- Decrease in general bad debts provision: (GH¢1,250)
- Increase in specific bad debts provision: GH¢1,800
Motor Expenses are made up of:
- Lease of a delivery van: GH¢11,500
- Van running expenses: GH¢6,910
Sundry Expenses are made up of:

Trade subscriptions: GH¢16,000
Support to elect a local Assembly Member: GH¢8,000
Provision for replacement of windows in the office: GH¢4,000
Gifts to customers during Christmas: GH¢6,000
Customer’s claim on defective goods: GH¢27,240
Provision for staff redundancy cost: GH¢25,000
Cost of investigating cash fraud: GH¢5,600
Investigation to acquire a new company: GH¢22,000

Additional Information:
The Ghana Revenue Authority has assessed and granted capital allowance of GH¢57,000 for the 2021 year of assessment.

Required:
You are required to compute the chargeable income for Konadu Yiadom Company Ltd for the 2021 year of assessment. Indicate clearly all necessary assumptions.

Answer

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Tags: Business income, Corporate Tax, Retail Operations, Tax computation
Level: Level 3

Topic: Business income - Corporate income tax
Series: JULY 2023

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

Question

Uswa Ltd is engaged in manufacturing and sale of footwear. The company maintains one central factory and warehouse and sells its products through company-operated retail outlets as well as through distributors. Management is in the process of preparing the budget for the year 2018 on the basis of the following information:

The marketing director has provided the following annual sales projections:

Category	No. of Units	Retail Price Range (GH¢)
Men	1,200,000	100 – 400
Women	500,000	85 – 250

It has been estimated that 30% of the units would be sold through distributors who paid GH¢95 and GH¢70 per footwear for men and women respectively.
The remaining 70% will be sold through company-operated retail outlets.
The previous pattern of sales indicates that 60% of these units are sold at the minimum price; 10% units are sold at the maximum price and remaining 30% at a price of GH¢200 and GH¢120 per footwear for men and women respectively.
The company incurs a variable cost of GH¢45 per footwear regardless of whether sales are through company-operated retail outlet or distributors.
The company operates 22 outlets all over the country. The fixed costs per outlet are GH¢12,000 per month and include rent, electricity, maintenance, etc.
Fixed costs for the factory and head office are GH¢4.5 million and GH¢1.5 million per month respectively.

Required:

i) Prepare a budgeted profit and loss account for the year 2018 for Uswa Ltd. (13 marks)

ii) Explain the term “budget manual.” (2 marks)

Answer

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Tags: Budget Manual, Budgeting, Cost Accounting, Profit and Loss, Retail Operations
Level: Level 2

Topic: Budgetary control
Series: NOV 2018

AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

Question

The following relates to the financial records of Konadu Yiadom Company Ltd submitted to the Ghana Revenue Authority for the year ended 31 December 2021. The company is into retail operations.

Notes:

The sales figure includes GH¢21,500 from the sale of old shop fittings which were replaced by new fittings during the year. The profit on the sale of the shop fittings was GH¢3,770.
Following completion of the accounts, the accountant received an invoice dated 14 December 2021 in respect of goods for resale, which were delivered in late December. This invoice was not recorded, and you have been informed that the total amount on the invoice, including VAT, was GH¢15,110. VAT included on the invoice was GH¢440. All levies are inclusive.
In June 2021, the company recognized the need to offer a special after-sales service to its customers. The company hired a new staff member and purchased a machine costing GH¢3,500 for the purpose. The local district assembly provided a grant to aid the purchase of the machine to the tune of GH¢1,250. The company included the cost of the machine in the purchases figure.
Staff cost is the total wages and salaries paid to the staff. GH¢37,000 was paid to fresh graduates employed during the year. They constitute 4% of the total workforce for the year 2021.
Promotion and Advertising is made up of:
- Managing Director’s wedding reception: GH¢2,800
- Refreshment during the opening of a new shop: GH¢5,000
- Sample product to invited guests during the opening of the new shop: GH¢3,510
Interest and Bank Payments are made up of:
- Interest on loan used to purchase stock for the business: GH¢3,020
- Overdraft interest on the business account: GH¢7,100
Legal Fees are made up of:
- Court fine resulting from traffic accident: GH¢3,950
- Defense of company driver for careless driving: GH¢3,830
- Litigation on business plot of land (90% chance of success): GH¢5,130
Bad Debts are made up of:
- Debt collection (Pursuing bad debts): GH¢455
- Decrease in general bad debts provision: (GH¢1,250)
- Increase in specific bad debts provision: GH¢1,800
Motor Expenses are made up of:
- Lease of a delivery van: GH¢11,500
- Van running expenses: GH¢6,910
Sundry Expenses are made up of:

Trade subscriptions: GH¢16,000
Support to elect a local Assembly Member: GH¢8,000
Provision for replacement of windows in the office: GH¢4,000
Gifts to customers during Christmas: GH¢6,000
Customer’s claim on defective goods: GH¢27,240
Provision for staff redundancy cost: GH¢25,000
Cost of investigating cash fraud: GH¢5,600
Investigation to acquire a new company: GH¢22,000

Additional Information:
The Ghana Revenue Authority has assessed and granted capital allowance of GH¢57,000 for the 2021 year of assessment.

Required:
You are required to compute the chargeable income for Konadu Yiadom Company Ltd for the 2021 year of assessment. Indicate clearly all necessary assumptions.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business income, Corporate Tax, Retail Operations, Tax computation
Level: Level 3

Topic: Business income - Corporate income tax
Series: JULY 2023

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

Question

The marketing director has provided the following annual sales projections:

Category	No. of Units	Retail Price Range (GH¢)
Men	1,200,000	100 – 400
Women	500,000	85 – 250

It has been estimated that 30% of the units would be sold through distributors who paid GH¢95 and GH¢70 per footwear for men and women respectively.
The remaining 70% will be sold through company-operated retail outlets.
The previous pattern of sales indicates that 60% of these units are sold at the minimum price; 10% units are sold at the maximum price and remaining 30% at a price of GH¢200 and GH¢120 per footwear for men and women respectively.
The company incurs a variable cost of GH¢45 per footwear regardless of whether sales are through company-operated retail outlet or distributors.
The company operates 22 outlets all over the country. The fixed costs per outlet are GH¢12,000 per month and include rent, electricity, maintenance, etc.
Fixed costs for the factory and head office are GH¢4.5 million and GH¢1.5 million per month respectively.

Required:

i) Prepare a budgeted profit and loss account for the year 2018 for Uswa Ltd. (13 marks)

ii) Explain the term “budget manual.” (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Manual, Budgeting, Cost Accounting, Profit and Loss, Retail Operations
Level: Level 2

Topic: Budgetary control
Series: NOV 2018

Question Tag: Retail Operations

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AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

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AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

You're reporting an error for "AT – July 2023 – L3 – Q4 – Business income – Corporate income tax"

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

You're reporting an error for "MA – Nov 2018 – L2 – Q2b – Budgetary control"

AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

You're reporting an error for "AT – July 2023 – L3 – Q4 – Business income – Corporate income tax"

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

You're reporting an error for "MA – Nov 2018 – L2 – Q2b – Budgetary control"

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