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Yaa Baby acquired shares in Adom Ltd as follows:
| Date | Transaction | No. of shares | Share price | Value (GH¢) |
|---|---|---|---|---|
| 01/02/19 | Bought 1,000 shares | 1,000 | 2.00 | 2,000 |
| 01/03/19 | Bought 1,500 shares | 1,500 | 2.50 | 3,750 |
| 01/06/20 | Bought 2,000 shares | 2,000 | 3.00 | 6,000 |
| 01/04/21 | Bought 1,750 shares | 1,750 | 4.00 | 7,000 |
| 01/12/21 | Received rights issue (1 share for every 10 shares) | 625 | 1.50 | 937.50 |
| 31/12/21 | Sold 3,800 shares | 6.00 | 22,800 |
Required:
Compute the capital gain on the realization and the tax payable. (5 marks)
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The provisions of the Income Tax Act, 2015 (Act 896) require a resident person who pays an amount for works or the supply of goods and services to another resident or non-resident person with a source in Ghana to withhold tax from the payment at the rate specified under Paragraph 8 of the First Schedule of the Act and pay same to the Commissioner-General.
Required:
Explain with examples the following:
i) Final withholding tax. (2.5 marks)
ii) Withholding tax on account. (2.5 marks)
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Find Related Questions by Tags, levels, etc.
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A Nigerian investor (Niger Ltd) in Ghana has the following information relating to its business:
| Year | Revaluation Reserves (GH¢) | Share Capital (GH¢) | Retained Earnings (GH¢) |
|---|---|---|---|
| 2021 | 250,000 | 1,000,000 | 1,200,000 |
| 2020 | 100,000 | 600,000 | 1,350,000 |
Required:
With relevant computations, comment on the tax implication of the transfer from Retained Earnings to Share Capital. (8 marks)
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Abotsi has been in employment at Asempa Ltd since 1 August 2019 as Finance Manager on a salary scale of GH¢32,000 by GH¢8,000 to GH¢48,000.
His service conditions include the following:
i) Responsibility allowance of 18% of basic salary
ii) Utilities allowance per annum of 10% of basic salary
iii) Risk allowance of 20% on basic salary and car maintenance allowance of 5% of basic salary
iv) Leave allowance of GH¢1,900 per annum
v) Medical allowance per annum of GH¢3,500
vi) Meals allowance of GH¢700 per month
vii) Two house helps on GH¢500 wages per month each. The amount is paid to Abotsi in cash directly by the company
viii) Bonus of 25% of annual basic salary
ix) Annual Overtime allowance of GH¢18,000
x) Unaccountable entertainment allowance of GH¢2,000 a year
xi) Provision of a well-furnished bungalow in respect of which he pays GH¢400 per month as rent by way of deduction at source
xii) Provision of a vehicle with driver and fuel for both official and private purposes
xiii) Special retirement package by way of a provident fund of which he contributes 9% of his basic salary, while the company contributes 11%. (The scheme is approved by the regulatory body)
xiv) Social Security and National Insurance Trust contribution of 5.5% and the employer contributes 13% of basic salary
xv) On 1 January 2021, he was given a car loan of GH¢20,000 to purchase a car for his mother at a simple interest rate of 15% per annum. The institution gives similar facilities to other customers at the rate of 28% but the statutory rate (Bank of Ghana rate) is 25%. The loan is to be paid within the period of 24 months
xvi) He is married to Abotsiwaa and Abotsimaa who are unemployed and contribute little or no financial support to their husband. Their responsibilities are limited to the management of the house
xvii) He has six (6) children, four (4) of whom are in Silicon Valley International School, Accra-Ghana, while the rest are working
xviii) He is also responsible for the upkeep of four (4) aged relatives of his
xix) He is currently pursuing MPHIL in Finance at UPSA where he incurred GH¢25,000 by way of educational expenses in 2021
xx) He is a director of Adwoa Mansa Ltd and receives a director’s emolument of GH¢24,450 (net of taxes)
xxi) He received a dividend of GH¢20,000 (net of taxes) from the Afia Manu Bank. The dividend was taxed at 8%.
Required:
Calculate his chargeable income for the 2021 Year of Assessment. (20 marks)
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Mr. John Romeski worked for Aligidon Company Ltd for 25 years and retired at the age of 60. In the last 3 years of his working life, he earned annual salary as follows:
| Year | Annual Salary (GH¢) |
|---|---|
| 58th | 93,000 |
| 59th | 96,000 |
| 60th | 99,000 |
He has 300 months’ contribution to his credit.
Required:
Assuming he retired under the National Pension Act, 2008 (Act 766), compute his pension benefit and his monthly pension pay. (5 marks)
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Section (33) of the Value Added Tax Act, 2013 (Act 870) states that; “Except as otherwise provided in this Act or Regulations, a taxable supply is a supply of goods or services made by a taxable person for consideration, other than an exempt supply, in the course of, or as part of taxable activity carried on by that taxable person”.
Required:
State THREE (3) activities that do not constitute supply of goods or services under the Value Added Tax Act, 2013 (Act 870). (5 marks)
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Tax planning opportunities are available to all persons. All business units may not have the same tax planning opportunities, hence the need to carefully select a business unit that may provide the intended benefits to the owner or owners.
Required:
Discuss FOUR (4) tax planning opportunities available to sole proprietorships which may not be available to limited liability companies.
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Adom Ltd intends to commence business in the following areas:
The management of Adom Ltd has indicated that it wants to conduct the business in the most ethical manner possible but at the same time make the maximum possible profit with minimum tax liability.
Required:
Discuss the tax implications in these sectors of the economy.
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Scenario:
Papana Ltd, a resident company in Ghana, has cash flow challenges after a major customer ceased business dealings. Dawadawa Ltd, another resident company, negotiated with Papana Ltd and acquired 52% of its underlying ownership. As part of this arrangement, Dawadawa Ltd secured a loan facility of GH¢100 million for Papana Ltd at an interest rate of 4% above the average rate of 25%. The total interest paid in 2021 was GH¢2 million. Dawadawa Ltd is exempt from tax on all its income.
The capital structure of Papana Ltd for the 2021 year of assessment is as follows:
Required:
i) Compute the tax implications of the above arrangement.
ii) What constitutes an exempt person?
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Gomoa Ltd, a resident of the United States of America, established two companies, Komenda Ltd (resident in South Africa) and Abirem Ltd (resident in Ghana). The Ghana Revenue Authority (GRA) requested information about Abirem Ltd for tax purposes.
The details for the 2021 year of assessment are as follows:
Additional information:
i) Gomoa Ltd invoiced goods to Abirem Ltd at a price of GH¢1,900,000, which is 10% higher than the market price.
ii) Dividend of GH¢700,000 paid by Abirem Ltd to Gomoa Ltd has been incorporated into Abirem Ltd’s cost.
iii) Management and technical services fee of GH¢1,290,000 paid to the group by Abirem Ltd has been added to operating expenses.
iv) Goods invoiced to Komenda Ltd by Gomoa Ltd amounted to GH¢1,000,000, priced 15% below the arm’s length price.
v) Dividend of GH¢200,000 received by Abirem Ltd from a resident company is included in its revenue. Abirem Ltd holds 25% of the resident company’s voting power.
vi) The Managing Director of Abirem Ltd took goods for personal use, valued at GH¢200,000 (cost), with a margin of 20%.
vii) The Managing Director of Abirem Ltd took additional goods worth GH¢130,000 at cost for home consumption, which was not added to the cost of goods above. The goods were sold at a 10% markup.
viii) Abirem Ltd paid GH¢20,000 in tax in South Africa at a rate of 27% on goods sold, which was included in its revenue.
ix) Abirem Ltd received a loan from Komenda Ltd for operations. Loan details are as follows:
Required:
Calculate the tax payable by Abirem Ltd for the 2021 year of assessment.
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Semenhyia Ltd is involved in the design and manufacture of custom-built factory equipment. The company has just received an enquiry about the supply of 10 machines from one of their regular clients, Kukua Ltd.
Kukua Ltd has informed the company that the maximum price they are willing to pay is GH¢5,200 per machine. The order would need to be completed within two weeks.
The following details relate to the production of the machines:
i) Materials per machine:
ii) Labour hours per machine:
iii) Supervision: A supervisor currently paid GH¢56,500 per annum will oversee the project, but a replacement will be hired for the duration of the contract at a cost of GH¢8,500.
iv) Machine hours: Each machine requires 18 hours of processing time on factory equipment. If the order is not accepted, the equipment would be subcontracted to Fimi Ltd for a contribution of GH¢70 per hour.
v) Depreciation: The depreciation charge for using the equipment for this order would be GH¢4,000.
vi) Overheads: Overheads are absorbed at a rate of GH¢35 per skilled labour hour.
vii) Estimate costs: The planning department has incurred costs to date of GH¢600.
Required:
a) Explain relevant cost and state TWO (2) examples of relevant cost in short-term decision-making. (3 marks)
b) Determine, using relevant costing principles, whether or not Semenhyia Ltd should undertake the contract. Your answer must include an explanation for the inclusion or exclusion of each of the above points. (13 marks)
c) Distinguish between “marginal cost” and “differential cost”. (4 marks)
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Slay Mama Plc (SMP) has been using line-item budgeting since its establishment. The Chief Executive Officer (CEO) recently attended a seminar on “Achieving the best out of your budget”. During the seminar, the facilitator highlighted the benefits of programme-based budgeting since it is a performance-based budgeting approach.
Required:
i) Explain Programme-Based Budgeting. (2 marks)
ii) Outline THREE (3) disadvantages of line-item budgeting. (3 marks)
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Kanfa Ltd received GH¢50 million as compensation from Ghana Highways Authority (GHA) when one of its properties was destroyed to pave way for the Accra–Kumasi highway construction. Management of Kanfa Ltd has decided to invest the amount received in one of three capital investment opportunities identified.
This is a long-term project, which would run for 20 years and will require an immediate outlay of GH¢50 million and net annual cash profits as follows:
At the end of the 20th year, the project would be decommissioned at a cost of GH¢2 million.
Kanfa Ltd is considering opening a Tourist Attraction Centre in Cape Coast, with an initial capital investment of GH¢50 million. It will operate for five years and be sold at an estimated price of GH¢5 million. The market research survey estimates the following visitor numbers and probabilities:
Entrance fee: GH¢40 per visitor, and each visitor is expected to spend GH¢15 on souvenirs and GH¢5 on refreshments. Variable costs per visitor: GH¢25 (including souvenirs and refreshments). Maintenance costs: GH¢2 million per annum.
This project involves a current outlay of GH¢50 million on equipment and GH¢15 million on working capital immediately. The working capital will increase to GH¢21 million in year one. Net annual cash profits: GH¢18 million for six years. The capital equipment can be sold for GH¢5 million at the end of the project.
Other information:
Required:
Calculate the Net Present Value (NPV) of each project and recommend which project the company should undertake on financial grounds.
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Ghanaman Senior High School (SHS), which has an enrollment of 2,500 students (residential), is one of the schools that depend on the government for the supply of food items. The bursar has proposed that a 50-kilogram bag of rice can feed 200 students per meal, while the same 50-kilogram bag of beans can be used for 350 students. Per the menu plan, rice will be served three times and beans twice a week. The SHS will run two semesters of 16 weeks each for the year 2023.
Other information:
i) Opening inventory:
ii) Inventory policy (Closing inventory):
Required:
Prepare the budget for the supply of both rice and beans needed to feed students for the two semesters of the year 2023.
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Odumasi Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product, which the company manufactures – ‘Tekie’. The system became operational on 1 March 2021.
The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product ‘Tekie’:
According to the Marketing Director, Odumasi Ltd operates in an industry where the budgeted selling price is normally calculated to achieve a markup of 30% on cost. The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.
The actual results for the month of March 2021 are as follows:
Required:
Calculate the relevant variances for March 2021 under the headings of sales, materials, labour, and overheads.
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