apportionment – Knowsia

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

Question

Welmount Ghana Ltd is a construction company with its registered office located at Cantoments in Accra. In February 2007 it purchased a parcel of land at Achimota at the cost of GH₵75,000. The company spent GH₵25,000 to construct a fence wall around the property and to complete title registration processes at the Lands Commission. In March 2008, the company also purchased shares in Barclays bank of Ghana for GH₵20,000. In April 2017, the board of directors of the company decided to purchase another parcel of land at Tse Addo near the Trade Fair at La. The board further resolved to sell off the parcel of land purchased in February 2007 and the shares the company held in Barclays bank to finance the purchase of the parcel of land at Tse Addo. The company engaged the services of a valuer to determine the market value of the land located at Achimota and the shares the company held in Barclays bank. The company paid the valuer GH₵30,000 for his services. A marketing firm was contracted to advertise the sale of the parcel of land and the shares and the firm submitted a bill of GH₵35,000 to the company. In June 2017, the company sold the parcel of land and the shares in a single transaction for GH₵500,000. At the time of the sale, the market value of the parcel of land was GH₵400,000 and that of the shares was GH₵100,000. The company paid GH₵40,000 to a law firm to conduct due diligence on the parcel of land the company intended to purchase. In February 2018, the Managing Director of the company signed the purchase agreement and an amount of GH₵600,000 was paid to the owners of the property.

Required:

I. Advise on the company on the income tax implications of the realization of the assets. (20 marks) II. Advise on measures the company could have adopted to mitigate its tax exposure (if any) on the realization of the assets.

Answer

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Tags: apportionment, Asset Realization, Capital Gains, Income Tax Act, Roll-Over Relief, Tax Planning
Level: Level 2

Topic: Taxation of Capital Transactions
Series: AUG 2018

MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques

Apportionment basis of floor area cost for various services

Question

Apportionment on the basis of Floor Area can be used for the following costs EXCEPT:
A. Rates
B. Lighting
C. Rent
D. Administration
E. Cleaning

Answer

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Tags: apportionment, Costing, Service Industries
Level: Level 1

Topic: Costing Techniques
Series: NOV 2022

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

Question

RSTU manufactures two products called S and T with a joint cost of N3,550,000. Normal process loss is 5% of expected output with scrap value of N50,000 and joint costs are apportioned based on sales value. Other data available are as follows:
Product S: 11,520 units, selling price N250
Product T: 9,750 units, selling price N320

The profit on product T is:
A. N1,515,628
B. N1,492,708
C. N1,416,000
D. N1,300,000
E. N1,274,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: apportionment, Joint Costs, Process Costing, Profit Calculation
Level: Level 1

Topic: Costing Techniques
Series: MAY 2024

MA – May 2019 – L2 – Q3a – Relevant cost and revenue

Discuss blanket overhead rate and prepare an overhead analysis sheet, including re-apportionment of service department costs.

Question

Bobich Ltd manufactures plastic containers for the pharmaceutical industry. The factory, in which the company undertakes all its production, has two production departments, namely: Cutting and Shaping, and two service departments, namely: Stores and Maintenance.

The information below was extracted from the company’s budget for its financial year ended 31 March 2019:

Allocated Overhead Costs	GH¢
Cutting Department (Cutting)	14,000
Shaping Department (Shaping)	16,000
Stores Department (Stores)	3,500
Maintenance Department (Maintenance)	2,800

Other Production Overheads	GH¢
Factory rent	525,000
Factory building insurance	70,000
Plant & machinery insurance	39,000
Plant & machinery depreciation	58,500
Canteen subsidy	150,000

Direct Costs	GH¢
Cutting Department	144,000
Shaping Department	210,000

The following additional information is also provided:

	Cutting	Shaping	Stores	Maintenance
Floor area (square meters)	18,000	12,000	3,000	2,000
Value of Plant & Machinery (GH¢)	300,000	50,000	25,000	15,000
Number of stores requisitions	1,000	500	–	–
Maintenance hours required	2,700	2,000	300	–
Number of employees	34	60	4	2
Machine hours	12,000	2,200	–	–
Labour hours	9,000	15,000	–	–

Required:
i) Explain what is meant by the term “blanket overhead rate.” (2 marks)
ii) Prepare an overhead analysis sheet based on the above information. You must clearly state the basis used for any apportionments. (7 marks)
iii) Re-apportion the service department costs and calculate the most appropriate overhead rate for each department. (Rate should be calculated to two decimal places). (3 marks)
iv) State THREE (3) reasons why companies calculate pre-determined overhead absorption rates. (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: apportionment, blanket overhead rate, Cost Allocation, Overhead Absorption, service department costs
Level: Level 3

Topic: Relevant Cost and Revenue
Series: MAY 2019

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

Question

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: apportionment, Asset Realization, Capital Gains, Income Tax Act, Roll-Over Relief, Tax Planning
Level: Level 2

Topic: Taxation of Capital Transactions
Series: AUG 2018

MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques

Apportionment basis of floor area cost for various services

Question

Apportionment on the basis of Floor Area can be used for the following costs EXCEPT:
A. Rates
B. Lighting
C. Rent
D. Administration
E. Cleaning

Answer

Find Related Questions by Tags, levels, etc.

Tags: apportionment, Costing, Service Industries
Level: Level 1

Topic: Costing Techniques
Series: NOV 2022

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

Question

The profit on product T is:
A. N1,515,628
B. N1,492,708
C. N1,416,000
D. N1,300,000
E. N1,274,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: apportionment, Joint Costs, Process Costing, Profit Calculation
Level: Level 1

Topic: Costing Techniques
Series: MAY 2024

MA – May 2019 – L2 – Q3a – Relevant cost and revenue

Discuss blanket overhead rate and prepare an overhead analysis sheet, including re-apportionment of service department costs.

Question

The information below was extracted from the company’s budget for its financial year ended 31 March 2019:

Allocated Overhead Costs	GH¢
Cutting Department (Cutting)	14,000
Shaping Department (Shaping)	16,000
Stores Department (Stores)	3,500
Maintenance Department (Maintenance)	2,800

Other Production Overheads	GH¢
Factory rent	525,000
Factory building insurance	70,000
Plant & machinery insurance	39,000
Plant & machinery depreciation	58,500
Canteen subsidy	150,000

Direct Costs	GH¢
Cutting Department	144,000
Shaping Department	210,000

The following additional information is also provided:

	Cutting	Shaping	Stores	Maintenance
Floor area (square meters)	18,000	12,000	3,000	2,000
Value of Plant & Machinery (GH¢)	300,000	50,000	25,000	15,000
Number of stores requisitions	1,000	500	–	–
Maintenance hours required	2,700	2,000	300	–
Number of employees	34	60	4	2
Machine hours	12,000	2,200	–	–
Labour hours	9,000	15,000	–	–

Answer

Find Related Questions by Tags, levels, etc.

Tags: apportionment, blanket overhead rate, Cost Allocation, Overhead Absorption, service department costs
Level: Level 3

Topic: Relevant Cost and Revenue
Series: MAY 2019

Question Tag: apportionment

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STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques

Apportionment basis of floor area cost for various services

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

MA – May 2019 – L2 – Q3a – Relevant cost and revenue

Discuss blanket overhead rate and prepare an overhead analysis sheet, including re-apportionment of service department costs.

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques

Apportionment basis of floor area cost for various services

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

MA – May 2019 – L2 – Q3a – Relevant cost and revenue

Discuss blanket overhead rate and prepare an overhead analysis sheet, including re-apportionment of service department costs.

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STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

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MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques

Apportionment basis of floor area cost for various services

You're reporting an error for "MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques"

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

You're reporting an error for "MI – May 2024 – L1 – SA – Q9 – Costing Techniques"

MA – May 2019 – L2 – Q3a – Relevant cost and revenue

Discuss blanket overhead rate and prepare an overhead analysis sheet, including re-apportionment of service department costs.

You're reporting an error for "MA – May 2019 – L2 – Q3a – Relevant cost and revenue"

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

You're reporting an error for "STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions"

MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques

Apportionment basis of floor area cost for various services

You're reporting an error for "MI – Nov 2022 – L1 – SA – Q1 – Costing Techniques"

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

You're reporting an error for "MI – May 2024 – L1 – SA – Q9 – Costing Techniques"

MA – May 2019 – L2 – Q3a – Relevant cost and revenue

Discuss blanket overhead rate and prepare an overhead analysis sheet, including re-apportionment of service department costs.

You're reporting an error for "MA – May 2019 – L2 – Q3a – Relevant cost and revenue"

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