- 20 Marks
ATP – Feb 2020 – L2 – Q3 – Sector-Specific Taxation
Compute tax liability for Xornami Insurance Company for 2018 based on trial balance and additional info.
Question
Xornami Insurance Company Limited has been operating a general insurance business in Ghana since 1st January, 2016.
Below is an extract from the Trial Balance as at 31/12/18:
| Description | GH¢000 |
|---|---|
| Land (Leasehold) | 10,000 |
| Building (at cost) | 130,000 |
| Motor Vehicles (at cost) | 22,000 |
| Furniture & Fittings (at cost) | 4,500 |
| Interest received on loans | 19,500 |
| Interest on Investment | 4,450 |
| Stated Capital | 100,000 |
| Gross Premium received | 127,600 |
| Claims paid during the year | 11,960 |
| Income Tax paid | 2,250 |
| Commission paid to Agents | 6,172 |
| General Administrative Expenses | 40,650 |
| Reinsurance Premium paid | 13,250 |
| Reinsurance recoveries | 18,540 |
| Premiums returned to clients | 19,308 |
The following additional information are made available to you:
(i) The lease is over a period of 40 years.
(ii) The General Administration Expenses include GH¢15,400 and GH¢2,500 in respect of depreciation and the Lease respectively for the year.
(iii) The company’s reserve for unexpired risk for the year ended 31st December, 2017 was GH¢42,000.
(iv) Assume that the depreciation charged in the financial statements for the year is equal to the depreciation allowances applicable to the company.
(v) Corporate Tax Rate: 25%.
Required:
Compute the tax liability of the company for 2018 year of assessment.
Find Related Questions by Tags, levels, etc.
- Tags: Insurance, Premiums, Reserves, Tax Liability
- Level: Level 2
- Topic: Sector-Specific Taxation
- Series: FEB 2020
