COURSE: TAXATION

QUESTION 4

Below is the income statement of Global Feed Manufacturing Company Limited, located in Wassa in the Western Region of Ghana. The statement covers the year ended 31/12/2012.

GH000 GH 000

Gross Profit 618,750

Rent Income 156, 250

Other Income 25,000

800,000

Less: Management Salaries 43,750

Staff Salaries 21,250

Hire of Equipment 18,125

Depreciation 7,500

Casual Labour 10,500

Office Rent 9,000

Vehicle Repairs 19,500

Business Promotions 5,250

Donations 11,375

Repairs of Factory Premises 28,500

Office Expenses 22,500

Bad Debts 73,750

Advertisements 1,500

272,500

Net Profit 527,500

Notes to the Accounts:

1. Other income includes profit on disposal of fixtures and fittings amounting to GH15,000,000.

2. Casual Labour is made up of Factory Hands and Wages of employees in Directors Private Property amounting to GH6,250,000 and GH4,250,000 respectively.

3. Vehicle Repairs includes cost of new engine of GH4,500,000, fuel & lubricants of GH8,750,000 and Tyres and Tubes of GH6,250,000.

4. Donations consist of the following: Kotoko Football Club GH7,500,000, National Trust Fund GH125,000 and Bereaved members of staff GH3,750,000 as part of funeral policy approved by the board.

5. Business Promotions:

- Wedding reception for Directors wedding day GH3,500,000

- Cost of entertaining business partners GH1,750,000

6. Repairs to Factory premises: GH

- Cost of New tiles for floor 16, 000,000

- New gates for factory 10,000,000

- Repair of cracks in the wall 2,500,000

7. Office Expenses includes New personal computer and stationary amounting to GH18,750,000 and GH3,750,000 respectively.

8. Office rent paid of GH 9,000,000 represents two years rent for the period ending 31st December 2013. Rental Income is taxed 8% final.

9. The written value of the companys chargeable assets as at 31/12/2011 were as follows:

GH

Building (cost 6,250,000) 5,000,000

Motor Vehicles 225,000,000

Plant and Machinery 7,500,000

Computers 5,000,000

Required:

(a) Determine the Companys Chargeable income for the 2012 year of assessment. (10 marks)

(b) Calculate the tax liability of the company for 2012 assessment year, if any (5 marks)

c) Relevant Explanatory Notes (5 marks) (Total: 20 marks)