Question 5.

(a) You have been appointed as the Tax Manager of Samada Insurance Company. The Executive Director has expressed his persistent worry with the Chief Accountant to accurately calculate the companys tax obligations to agree with what is assessed by the Ghana Revenue Authority each year. He has thus, provided you with the Income Statement below for your consideration and advice.

SAMANDA INSURANCE COMPANY LIMITED Income Statement for the years ended 2013 and 2014

2014 2013

Note GH000 GH000

Gross Premium 21,000 16,800

Less Reinsurances (1,400) (1,200)

Net Premium 9,600 15,600

Claims Paid (12,600) (9,600)

Salaries (Management Expenses) (5,880) (4,750)

Commission to Agents (980) (850)

Other Management Expenses (1) (2,033) (1,750)

Underwriting Profit (1,893) (1,350)

Investment Income(Interest on Commercial Papers) 11,200 7,400

Other Income (2) 6,300 8,400

Reinsurance recoveries 5,600 3,200

Net profit before finance and Tax 21,207 17,650

Finance Cost (5,950) (3,850)

Tax Charged (3,814) (3,450)

Net Profit after Tax 11,443 10,350

Notes to the Income Statements

Note 1 Other Management Expenses: GH000 GH000

Advertising 168 50

Depreciation 1,700 1,450

Painting of New Office 140 0

Vehicle Rental 25 250

Note 2 Other Income:

Gross Dividend 4,300 8,400

Premium Received in respect of 2015 2,000 0

Note 3

i) Capital allowance agreed for the year 2014 was GH2,450,000

ii) Reserve is calculated at 40% of Net premium

. Required:

Compute the tax due the GRA for 2014 year of Assessment and Support your computations with relevant explanations. (10 marks)