Tema Accountancy Centre: Taxation & Fiscal Policy- Lecturer (Timore Boi Framcis-0540-150-810) MAY 2013 ADVANCED TAXATION
QUESTION 5
Hypec Manufacturing Company Ltd, producers of household utensils for both the local and st export markets, commenced business on 1 May 2008. The company acquired the following chargeable assets for use in the business which is located at Tarkwa in the Western Region. Date of Purchase Buildings Office equipment Computers/Software Toyota saloon car Office furniture Nissan bus Toyota Land Cruiser Data Handling Machines Toyota bus Office equipment
Cost GHC 200,000 15,000 400,000 40,000 8,000 50,000 80,000 90,000 70,000 9,000
May 2008 June 2008 July 2008 Sept. 2008 Feb. 2009 April 2009 May 2011 July 2011 Oct. 2011 Nov. 2011 st
The Toyota saloon car was sold on 1 September 2010 for GHC24,000. th
The Nissan Bus was involved in an accident in October 2010, and on 15 2010. GHC22,000 compensation was received from the insurance company.
December
Some of the office equipment bought in 2008 were sold in July 2010 for GHC17,000, and GHC20,000 was paid in December 2011 for extension works on the building. Additional information 1.
The company’s sales and adjusted profits during the period were as follows: Period Period to 31/12/2008 Year to 31/12/2009 Year to 31/12/2010 Year to 31/12/2011
Profit GHC 100,000 180,000 108,571 450,000
Export Sales GHC 309,000 450,000 600,000 1,000,000
Local Sales GHC 3,000,000 4,500,000 6,000,000 9,000,000
Require :
Determine the chargeable incomes and tax liability of Hypec Manufacturing Company Ltd for all the relevant years. 20 marks
Tema Accountancy Centre: Taxation & Fiscal Policy- Lecturer (Timore Boi Framcis-0540-150-810)
Solution 5
Tema Accountancy Centre: Taxation & Fiscal Policy- Lecturer (Timore Boi Framcis-0540-150-810)
Solution 5
HYPEC MANUFACTURING COMPANY LTD Capital Allowance Computations
2008 (245 days) Capital allowance Written down value c/f 2009
Additions
Capital allowance Written down value 2010 Less disposals Capital allowance 2011 Written down value b/f 2011 Additions Capital allowance
Pool 1 40% 400,000 107,397 292,603
Pool 2 30% 25,000 5,034 19,966
Pool 4 20% 15,000 2,014 12,986
Pool 5 (a) 10% 200,000 13,425 186,575
Pool 5 (b) 10% -
292,603 117,041 175,562 175,562 70,225 105,337 90,000 195,337 78,135 117,202
50,000 69,966 20,990 48,976 (46,000) 2,976 893 2,083 95,000 97,083 29,125 37,958
8,000 20,986 4,197 16,789 (17,000) NIL 9,000 9,000 1,800 7,200
186,575 20,000 166,575 166,575 20,000 146,575 146,575 20,000 126,575
-
Totals
127,870
162,228
91,118 20,000 20,000 2,000 18,000
131,060
GHC Year of Assessment 2008: Profit as per accounts Less: Capital allowance b/f Amount utilized Capital allowance c/f Chargeable income Tax Year of Assessment 2009 Profit as per accounts Less: Capital allowance b/f Current Utilized c/f Chargeable income Tax Year of Assessment 2010 Profit as per accounts Additional income 17,000 – 16,789 Assessable income Less: Capital allowance b/f 10,098 Current 91,118 Chargeable income Tax
100,000 27,870 100,000 27,870
100,000 NIL_
NIL_ 180,000 27,870 162,228 190,098 180,000 10,098
180,000 NIL_
NIL 108,571 211 108,782 101,216 7,566 GHC1,891.50
Tax Liability: Export
600,000 x 7,566 6,600,000
688
Tax thereon at 8% Domestic
GHC55.00
600,000 x 7,566 6,600,000
6,878
Tax thereon 0.25% Less Rebate Total tax due (55 + 860)
=
Year of Assessment 2011 (1/1/11 – 31/12/11) Profit per accounts Less Capital allowance Chargeable income Tax thereon at 8%
450,000 131,060 318,940
Domestic
287,046
9,000,000 x 318,940 10,000,000
Tax thereon 25% Tax rebate 50%
GHC1,720 860 860 915
2,552
71,762 35,881
35,881 38,433
QUESTION 5 (Nov 2012 Advanced taxation & fiscal policy)
Kawado Company Limited, manufacturers of cotton wool for export only, commenced business on 1st February, 2009 and submitted its first set of accounts for the period ended 30 th September, 2010. Below are the details:GHC Gross profit b/f Add Dividend Received Profit on sale of fixed assets
GHC 450,000
3,100 48,500
51,600 501,600
Less Expenses Salaries and Wages Director s’ Remuneration Electricity and Water Printing and Stationery Adverts & Publicity Telephone and Postage Repairs & Maintenance (Plant & Equipment) Repairs & Maintenance (Office & Equipment) Insurance Registration and Licence Depreciation Business Promotion and Entertainment Legal Fees Penalties and Fines Net Profit
146,000 52,000 31,500 8,200 23,700 800 60,000 6,500 13,800 16,200 108,000 16,000 8,000 4,200
494,900 6,700
Notes to the accounts: 1.
Adverts and Publicity (23,700) Radio and Television Daily Graphic Permanent signboard at entrance of factory
2.
Repairs & Maintenance (Plant & Equipment (60,000) Installation of machine General Maintenance New standing generator
GHC 7,200 2,300 14,200 23,700
21,500 18,000 20,500 60,000
5
3.
Business Promotion & Entertainment (16,000) Entertainment (Opening of factory) Sample products to invited guests
13,500 2,500 16,000
4. Legal Fees (8,000) GHC 6,400 1,600 8,000
Formation of company Litigation on plot of land
The company’s business assets are made up as follows:
i. ii. iii. iv. vi.
Types of Asset Factory Building Plant & Machinery Generators Office Building v. Delivery Van Toyota Pick-up
Date of Acquisition January, 2009 March, 2009 June, 2010 May, 2009 September, 2009 April, 2010
Cost (GHC) 230,000 171,000 20,500 106,000 40,000 36,000
Required : Compute the company’s chargeable income for all relevant years. (24 marks)
7 Question 5
GHC
Net profit as per a/cs Deduct: Profit on sale of fixed assets
GHC 6,700
48,500
Dividend received
3,100
Add: Depreciation Permanent signboard Cost of installation of machines Cost of standby generators Entertainment (opening of factory) Legal expenses (formation) Adjusted profit
108,000 4,200 14,200 21,500 20,500 13,500 6,400
51,600 (44,900)
188,300 143,400
Computation of Tax 2009
GHC 57,360 56,701 659
(1/2/09-30/9/09) (8/20 x 143,400) Less C/Allce Chargeable Income
2010
(1/10/09 – 30/9/10) (12/20 x 143,400) Less C/Allce Utilised c/f Chargeable Income
CAPITAL ALLOWANCE COMPUTATION YEARS OF CLASS 2 ASSESSMENT (30%) 2009 1/2/09 – 30/9/09) B/F D/Allce C/F
86,040 94,706 86,040 8,666
86,040 NIL
CLASS 4 (20%)
CLASS 5 (10%)
40,000 7,956 32,044
192,500 25,526 166,974
350,200 23,219 326,981
36,000 68,044 20,413 47,631
41,000 207,974 41,595 166,379
326,981 32,698 294,283
TOTALS
56,701
2010 (1/10/09 – 30/9/10) Adds D/Allce C/F 2011
94,706
QUESTION 1 (May 2013- Principles and Practice of Taxation)
Finestyle Furniture Ltd commenced business on 1 st October 2009 even though the company was registered on 1st April 2009. The company purchased two lathe turner machines on 1/7/09 at a cost of GHC10,000 each and a spraying machine on 15/10/09 at a cost of GHC20,000. In October 2009 the company put up structures for the workshop. The cost was GHC5,000. The company declared the following results: Period Year Year
01/10/09 - 31/12/10 = 01/01/11 - 31/12/11 = 01/01/12 - 31/12/12 =
GHC45,000 GHC60,000 GHC65,000
Required : Compute the tax liabilities of the company for all relevant years.
SOLUTION 1 (May 2013 Principles and Practice of taxation)
CAPITAL ALLOWANCES
Year
Building
Machinery
Total
5,000 125 4,875
40,000 3,000 37,000
3,125
2010 01/01/10 – 31/12/10 Residue b/d AA Residua c/f
4,875 500 4,375
37,000 11,100 25,900
11,600
2011 01/01/11 – 31-12-11 Residua b/d AA Residue c/f
4,375 500 3,875
25,900 7,770 18,130
8,270
2012 01/01/12 -31/12/12 Residue b/d AA
3,875 500
18,130 5,439
2009 01/10/09 – 31/12/09 AA (1/4) Residue c/f
5,939
INCOMES 2009
01/10/09 – 31/12/09
Less C.A.
= = = = = = = = = = = = = =
Tax 25%
=
Less C.A. C.I. Tax 25% 2010
01/01/10 – 31/12/10 Less C.A. C.I. Tax 25%
2011
01/01/11 – 31/12/11 Less C.A. C. I. Tax 25%
2012
01/01/12 – 31/12/12
GHC 9,000.00 3,125.00 6,875.00 1,718.75 36,000.00 11,600.00 24,400.00 6,100.00 60,000.00 8,270.00 51,730.00 12,932.50 65,000.00 5,393.00 59,061.00 14,765.25
