Question Tag: Assessable Income

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  • 15 Marks

TAX – May 2017 – L2 – SC – Q5 – Taxation of Trusts and Estates

Computation of assessable income for trust beneficiaries and net assessable income in the hands of the trustee.

Alhaji Oluwambe is the trustee of a Settlement created by late Chief Jongbo in favor of his four children, grandchildren, and others. He submitted the following information to Okun State Board of Internal Revenue for assessment purposes for the fiscal year ended December 31, 2014:

ii. Each beneficiary is entitled to 1/6 share of 1/3 of the distributable income.
iii. Capital allowance agreed with the tax authority was N7,350,000.

Required:

a. Compute the assessable income in the hands of each beneficiary. (14 Marks)
b. Determine the Net Assessable Income in the hands of the Trustee. (1 Mark)

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  • 20 Marks

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

a) Obi Consults is a civil engineering consulting firm of many years. The founding partners are Bibi, Kose, and Fowora. The financial year-end of the firm is December 31 each year. The following information was extracted from the partnership’s financial statements/records for the year ended December 31, 2018:

Details Amount (N)
(i) Net profit for the year 21,575,000
(ii) Provision for depreciation 13,250,000
(iii) Fine paid for traffic offence 25,000
(iv) Donations to “politicians in business” 150,000
(v) Donation to National Library Board 165,000
(vi) Profit from sale of excavator 1,600,000
(vii) Capital allowances 6,575,000
(viii) Balancing allowance 677,000
(ix) Balancing charge 1,315,000

Additional information:

  • Profit sharing ratio: Bibi – 1/2, Kose – 1/4, Fowora – 1/4
  • Bibi and Fowora are entitled to 5% interest per annum on a loan of N10,500,000 each. Fowora’s loan was refunded fully on his retirement.
  • Salaries paid: Bibi – N10,800,000, Kose – N8,250,000, Fowora – N8,250,000
  • Fowora retired on June 30, 2018, and Jaycee was admitted as a new partner on July 1, 2018, with an annual salary of N8,250,000. Jaycee introduced a loan of N7,000,000 on July 1, 2018, entitled to a 5% interest per annum.
  • The profit-sharing ratios after Jaycee’s admission: Bibi – 1/2, Kose – 7/20, Jaycee – 3/20

You are required to:
(i) Compute the adjusted/assessable income of the partnership. (5 Marks)
(ii) Determine the share of profits among the partners. (3 Marks)
(iii) Show relevant workings for prorated salaries and interest on loans, assuming simple interest. (2 Marks)
(iv) Compute the assessable income of each partner. (10 Marks)

 

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  • 7 Marks

PT – May 2020 – L2 – Q3a – Scope and computation of income tax for partnerships

Assessable income computation for partners in a partnership business.

a) During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and cost of traveling for leave.

David Stella Percy
Profit/loss sharing ratio 3 2 1
Salaries GH¢48,000 GH¢72,000 GH¢96,000
Interest on Capital GH¢30,000 GH¢20,000 GH¢10,000
Cost of traveling for leave GH¢20,000 GH¢30,000 GH¢25,000
Required:
Compute the assessable income for each partner.
(7 marks)

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  • 7 Marks

PT – May 2020 – L2 – Q3a – Income Tax Liabilities

This question involves computing the assessable income for each partner in a partnership based on profit-sharing ratios and additional benefits.

During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and costs of traveling for leave.

Partner Profit/Loss Sharing Ratio Salaries (GH¢) Interest on Capital (GH¢) Cost of Traveling for Leave (GH¢)
David 3 48,000 30,000 20,000
Stella 2 72,000 20,000 30,000
Percy 1 96,000 10,000 25,000
Required:
Compute the assessable income for each partner.
(7 marks)

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  • 12 Marks

PT – July 2023 – L2 – Q4a – Corporate Tax Liabilities

Calculation of capital allowance and assessable income for Karma Ltd for three years of assessment.

Karma Ltd commenced business on 1 March 2020 preparing accounts to December each year. The following assets were acquired for use in the business:

Asset Date of Acquisition Cost (GH¢)
Industrial Building 15/10/2019 2,500,000
Plant & Machinery 20/11/2019 1,600,000
Computers 03/01/2020 80,000
Office Equipment 10/01/2020 138,000
Motor Van 15/02/2020 220,000
Toyota Saloon Car 30/09/2020 180,000

Additional assets acquired during 2022:

  • Computers and accessories – GH¢105,000
  • Office Equipment – GH¢78,000

The Toyota Saloon Car was written off in an accident on 31 October 2022, and the company received GH¢120,000 as compensation.

Profits declared by Karma Ltd for the first three years of assessment:

  • Period to 31/12/2020: GH¢600,000
  • Year to 31/12/2021: GH¢1,500,000
  • Year to 31/12/2022: GH¢2,680,000

Required:
Compute the capital allowance and the assessable income of the company for the relevant years of assessment. (12 marks)

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  • 20 Marks

PT – Nov 2020 – L2 – Q3 – Income Tax Liabilities

Compute the assessable income for partners, explain the taxation rules for different workers, and define resident individual for tax purposes.

Shika, Bekwai, and Sena, who are in partnership, have agreed to share profits and losses in the ratio of 2:2:3, respectively. During the year ended 31 December 2018, their books showed an adjusted profit of GH¢210,000 after accounting for the following:

Shika Bekwai Sena
Salaries 70,000 80,000 150,000
Interest on Capital 12,000 16,000 12,000
Partners’ Drawings 6,000 4,000 10,000

You are given the following additional information:
i) Shika is married with two children who are in school and maintained two dependent relatives, who are more than 60 years, on which she spends GH¢10,000 annually.
ii) Shika also has a life assurance policy on herself attracting capital sum of GH¢1,600,000 but pays annual premium of GH¢1,800.
iii) Bekwai took a mortgage for his building and has been paying GH¢4,000 per month as mortgage interest.
iv) Bekwai is undertaking a two-week training program to update his knowledge on how to manage accounting software used in partnership businesses. He has spent GH¢1,500 on the training.
v) Bekwai received a television as a gift valued at GH¢3,000 for being the best worker in 2018 in Ghana.
vi) Sena is 62 years old and unmarried but has three dependent children while Bekwai is also unmarried but has one child who is schooling in Ghana.

Required:
a) Compute the assessable income for each partner for the year 2018. (10 marks)
b) The partnership business has some casual workers, temporary workers, and part-time workers. What are the taxation rules and tax liabilities of such workers? (6 marks)
c) Shika is an ‘international woman’ who travels often. There was confusion in 2018 as to whether she should be taxed as a resident or non-resident. What constitutes a resident individual for taxation purposes in Ghana? (4 marks)

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  • 10 Marks

PT – Mar 2024 – L2 – Q3c – Income Tax Liabilities

Compute the assessable income for all relevant years for Hajia Bintu after ceasing operations.

Hajia Bintu has been in business from 1 September 2018, preparing accounts to 31 August each year. She ceased to operate the business on 31 May 2023. The agreed profits for the past years of operations are as follows:

Year Agreed Profits (GH¢)
Year to 30/8/2019 18,000,000
Year to 30/8/2020 23,000,000
Year to 30/8/2021 28,000,000
Year to 30/8/2022 33,000,000
Period to 31/5/2023 50,000,000

Required:
Calculate the assessable income for all relevant years.

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  • 17 Marks

AT – Nov 2017 – L3 – Q2a – Business income – Corporate income tax

Calculating the assessable income and tax payable of Mr. Osei Bobie for the year 2016.

Mr. Osei Bobie, an amputee, was the Senior Accountant of Soroku Mine Company Limited (a mining company) for many years with a basic salary of GH¢54,000 per annum. He was entitled to a company vehicle, fuel, and driver.

He acted for the Director of Finance in March, April, and May 2016, during which month his salary was raised to GH¢5,000 per month.

Mr. Osei Bobie was housed in the company lavishly furnished accommodation on the mine.

He was also entitled to the following monthly allowances:

  • Professional allowance GH¢400
  • Responsibility allowance GH¢500

Mr. Osei Bobie resigned from Soroku Mine Limited on 30 June 2016. He received the following on his resignation:

  • He was allowed to take home the company’s pick-up he was using valued at GH¢5,000.
  • Cash gifts from staff GH¢6,100.

On 1 August 2016, he took up an appointment as Accounts Manager of Phinex Limited (a retailing company) on a salary of GH¢72,000 per annum. His other entitlements were agreed as follows:

  • Responsibility Allowance – GH¢150 per month
  • Cost of Living Allowance – GH¢200 per month
  • Risk Allowance – GH¢100 per month
  • Overtime Pay – GH¢250 per month
  • Bonus – GH¢1,500 in each December
  • Vehicle and fuel
  • Accommodation only

Mr. Osei Bobie finances the following insurance policies and also contributes to the Social Security and National Insurance Trust (SSNIT):

Insured Premium Sum Assured
Mrs. Gameli (sister) GH¢500 GH¢4,000
Mr. Osei Bobie GH¢3,600 GH¢35,000

Mr. Osei Bobie is not married, but he is responsible for his three children, who are all attending registered Senior High Schools. Mr. Osei Bobie supports his 72-year-old grandmother with GH¢300 per month despite her immense wealth. His grandmother depends entirely on him.

Required:
a) Compute the assessable income and tax payable of Mr. Osei Bobie for the year 2016. (17 marks)

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  • 15 Marks

TAX – May 2017 – L2 – SC – Q5 – Taxation of Trusts and Estates

Computation of assessable income for trust beneficiaries and net assessable income in the hands of the trustee.

Alhaji Oluwambe is the trustee of a Settlement created by late Chief Jongbo in favor of his four children, grandchildren, and others. He submitted the following information to Okun State Board of Internal Revenue for assessment purposes for the fiscal year ended December 31, 2014:

ii. Each beneficiary is entitled to 1/6 share of 1/3 of the distributable income.
iii. Capital allowance agreed with the tax authority was N7,350,000.

Required:

a. Compute the assessable income in the hands of each beneficiary. (14 Marks)
b. Determine the Net Assessable Income in the hands of the Trustee. (1 Mark)

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  • 20 Marks

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

a) Obi Consults is a civil engineering consulting firm of many years. The founding partners are Bibi, Kose, and Fowora. The financial year-end of the firm is December 31 each year. The following information was extracted from the partnership’s financial statements/records for the year ended December 31, 2018:

Details Amount (N)
(i) Net profit for the year 21,575,000
(ii) Provision for depreciation 13,250,000
(iii) Fine paid for traffic offence 25,000
(iv) Donations to “politicians in business” 150,000
(v) Donation to National Library Board 165,000
(vi) Profit from sale of excavator 1,600,000
(vii) Capital allowances 6,575,000
(viii) Balancing allowance 677,000
(ix) Balancing charge 1,315,000

Additional information:

  • Profit sharing ratio: Bibi – 1/2, Kose – 1/4, Fowora – 1/4
  • Bibi and Fowora are entitled to 5% interest per annum on a loan of N10,500,000 each. Fowora’s loan was refunded fully on his retirement.
  • Salaries paid: Bibi – N10,800,000, Kose – N8,250,000, Fowora – N8,250,000
  • Fowora retired on June 30, 2018, and Jaycee was admitted as a new partner on July 1, 2018, with an annual salary of N8,250,000. Jaycee introduced a loan of N7,000,000 on July 1, 2018, entitled to a 5% interest per annum.
  • The profit-sharing ratios after Jaycee’s admission: Bibi – 1/2, Kose – 7/20, Jaycee – 3/20

You are required to:
(i) Compute the adjusted/assessable income of the partnership. (5 Marks)
(ii) Determine the share of profits among the partners. (3 Marks)
(iii) Show relevant workings for prorated salaries and interest on loans, assuming simple interest. (2 Marks)
(iv) Compute the assessable income of each partner. (10 Marks)

 

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  • 7 Marks

PT – May 2020 – L2 – Q3a – Scope and computation of income tax for partnerships

Assessable income computation for partners in a partnership business.

a) During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and cost of traveling for leave.

David Stella Percy
Profit/loss sharing ratio 3 2 1
Salaries GH¢48,000 GH¢72,000 GH¢96,000
Interest on Capital GH¢30,000 GH¢20,000 GH¢10,000
Cost of traveling for leave GH¢20,000 GH¢30,000 GH¢25,000
Required:
Compute the assessable income for each partner.
(7 marks)

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  • 7 Marks

PT – May 2020 – L2 – Q3a – Income Tax Liabilities

This question involves computing the assessable income for each partner in a partnership based on profit-sharing ratios and additional benefits.

During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and costs of traveling for leave.

Partner Profit/Loss Sharing Ratio Salaries (GH¢) Interest on Capital (GH¢) Cost of Traveling for Leave (GH¢)
David 3 48,000 30,000 20,000
Stella 2 72,000 20,000 30,000
Percy 1 96,000 10,000 25,000
Required:
Compute the assessable income for each partner.
(7 marks)

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  • 12 Marks

PT – July 2023 – L2 – Q4a – Corporate Tax Liabilities

Calculation of capital allowance and assessable income for Karma Ltd for three years of assessment.

Karma Ltd commenced business on 1 March 2020 preparing accounts to December each year. The following assets were acquired for use in the business:

Asset Date of Acquisition Cost (GH¢)
Industrial Building 15/10/2019 2,500,000
Plant & Machinery 20/11/2019 1,600,000
Computers 03/01/2020 80,000
Office Equipment 10/01/2020 138,000
Motor Van 15/02/2020 220,000
Toyota Saloon Car 30/09/2020 180,000

Additional assets acquired during 2022:

  • Computers and accessories – GH¢105,000
  • Office Equipment – GH¢78,000

The Toyota Saloon Car was written off in an accident on 31 October 2022, and the company received GH¢120,000 as compensation.

Profits declared by Karma Ltd for the first three years of assessment:

  • Period to 31/12/2020: GH¢600,000
  • Year to 31/12/2021: GH¢1,500,000
  • Year to 31/12/2022: GH¢2,680,000

Required:
Compute the capital allowance and the assessable income of the company for the relevant years of assessment. (12 marks)

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  • 20 Marks

PT – Nov 2020 – L2 – Q3 – Income Tax Liabilities

Compute the assessable income for partners, explain the taxation rules for different workers, and define resident individual for tax purposes.

Shika, Bekwai, and Sena, who are in partnership, have agreed to share profits and losses in the ratio of 2:2:3, respectively. During the year ended 31 December 2018, their books showed an adjusted profit of GH¢210,000 after accounting for the following:

Shika Bekwai Sena
Salaries 70,000 80,000 150,000
Interest on Capital 12,000 16,000 12,000
Partners’ Drawings 6,000 4,000 10,000

You are given the following additional information:
i) Shika is married with two children who are in school and maintained two dependent relatives, who are more than 60 years, on which she spends GH¢10,000 annually.
ii) Shika also has a life assurance policy on herself attracting capital sum of GH¢1,600,000 but pays annual premium of GH¢1,800.
iii) Bekwai took a mortgage for his building and has been paying GH¢4,000 per month as mortgage interest.
iv) Bekwai is undertaking a two-week training program to update his knowledge on how to manage accounting software used in partnership businesses. He has spent GH¢1,500 on the training.
v) Bekwai received a television as a gift valued at GH¢3,000 for being the best worker in 2018 in Ghana.
vi) Sena is 62 years old and unmarried but has three dependent children while Bekwai is also unmarried but has one child who is schooling in Ghana.

Required:
a) Compute the assessable income for each partner for the year 2018. (10 marks)
b) The partnership business has some casual workers, temporary workers, and part-time workers. What are the taxation rules and tax liabilities of such workers? (6 marks)
c) Shika is an ‘international woman’ who travels often. There was confusion in 2018 as to whether she should be taxed as a resident or non-resident. What constitutes a resident individual for taxation purposes in Ghana? (4 marks)

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  • 10 Marks

PT – Mar 2024 – L2 – Q3c – Income Tax Liabilities

Compute the assessable income for all relevant years for Hajia Bintu after ceasing operations.

Hajia Bintu has been in business from 1 September 2018, preparing accounts to 31 August each year. She ceased to operate the business on 31 May 2023. The agreed profits for the past years of operations are as follows:

Year Agreed Profits (GH¢)
Year to 30/8/2019 18,000,000
Year to 30/8/2020 23,000,000
Year to 30/8/2021 28,000,000
Year to 30/8/2022 33,000,000
Period to 31/5/2023 50,000,000

Required:
Calculate the assessable income for all relevant years.

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  • 17 Marks

AT – Nov 2017 – L3 – Q2a – Business income – Corporate income tax

Calculating the assessable income and tax payable of Mr. Osei Bobie for the year 2016.

Mr. Osei Bobie, an amputee, was the Senior Accountant of Soroku Mine Company Limited (a mining company) for many years with a basic salary of GH¢54,000 per annum. He was entitled to a company vehicle, fuel, and driver.

He acted for the Director of Finance in March, April, and May 2016, during which month his salary was raised to GH¢5,000 per month.

Mr. Osei Bobie was housed in the company lavishly furnished accommodation on the mine.

He was also entitled to the following monthly allowances:

  • Professional allowance GH¢400
  • Responsibility allowance GH¢500

Mr. Osei Bobie resigned from Soroku Mine Limited on 30 June 2016. He received the following on his resignation:

  • He was allowed to take home the company’s pick-up he was using valued at GH¢5,000.
  • Cash gifts from staff GH¢6,100.

On 1 August 2016, he took up an appointment as Accounts Manager of Phinex Limited (a retailing company) on a salary of GH¢72,000 per annum. His other entitlements were agreed as follows:

  • Responsibility Allowance – GH¢150 per month
  • Cost of Living Allowance – GH¢200 per month
  • Risk Allowance – GH¢100 per month
  • Overtime Pay – GH¢250 per month
  • Bonus – GH¢1,500 in each December
  • Vehicle and fuel
  • Accommodation only

Mr. Osei Bobie finances the following insurance policies and also contributes to the Social Security and National Insurance Trust (SSNIT):

Insured Premium Sum Assured
Mrs. Gameli (sister) GH¢500 GH¢4,000
Mr. Osei Bobie GH¢3,600 GH¢35,000

Mr. Osei Bobie is not married, but he is responsible for his three children, who are all attending registered Senior High Schools. Mr. Osei Bobie supports his 72-year-old grandmother with GH¢300 per month despite her immense wealth. His grandmother depends entirely on him.

Required:
a) Compute the assessable income and tax payable of Mr. Osei Bobie for the year 2016. (17 marks)

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