- 20 Marks
Question
Ace, Brace and Crate have been in partnership since 2006 trading as Zee & Associates dealing in cement and preparing accounts to December 31 each year. Their Partnership Agreement showed that they share profits in the ratio 5:4:3 respectively.
The written-down values of the assets used in their operations as at 31st December, 2011 were as follows:
| GH¢ | |
|---|---|
| Office Equipment | 148,000.00 |
| Pick–up vehicles | 95,000.00 |
| Saloon vehicles | 80,000.00 |
Brace resigned from Zee & Associates on 2nd January 2013 and on his exit, Ace and Crate continued the business agreeing to share profits in the ratio 2:1 respectively.
The partnership Firm acquired the following additional assets:
a) A building for office annex costing GH¢430,000.00 on 4th October, 2013.
b) One Toyota Camry for GH¢85,000.00 on 26th March 2012
c) One Toyota Land Cruiser Prado at a cost of GH¢188,000.00 on 3rd July, 2013
Some of the office equipment were sold on 15th June, 2013 for GH¢35,000.00.
The Firm’s adjusted profits for tax purposes but before grant of capital allowance were as follows:
| Year to 31/12/2012 | GH¢315,000.00 |
|---|---|
| Year to 31/12/2013 | GH¢298,000.00 |
| Year to 31/12/2014 | GH¢328,000.00 |
You are required to compute the chargeable income, if any, of each partner for the relevant years of assessment on the assumption that no other incomes accrued to any of the partners.
Answer
Ace, Brace and Crate trading as Zee & Associates
Computation of Capital Allowance
2012 to 2014 Years of Assessment
| Pool 2 (30%) | Pool 4 (20%) | Pool 5 (10%) | Total | |
|---|---|---|---|---|
| GH¢ | GH¢ | GH¢ | GH¢ | |
| 2012 Year of Assessment | ||||
| BP: 1/01/2012 – 31/12/2012 | ||||
| Balance in Pool b/fwd | 175,000.00 | 148,000.00 | – | |
| Additions (value restricted) | 25,000.00 | – | – | |
| Balance in Pool | 200,000.00 | 148,000.00 | – | |
| Capital Allowance | 60,000.00 | 29,600.00 | – | 89,600.00 |
| Balance c/fwd | 140,000.00 | 118,400.00 | – | |
| 2013 Year of Assessment | ||||
| BP: 1/01/2013 – 31/12/2013 | ||||
| Balance in Pool b/fwd | 140,000.00 | 118,400.00 | – | |
| Additions (value restricted – Camry) | 75,000.00 | – | 430,000.00 | |
| Proceeds from Disposal | – | (35,000.00) | – | |
| Balance in Pool | 215,000.00 | 83,400.00 | 430,000.00 | |
| Capital Allowance | 64,500.00 | 16,680.00 | 43,000.00 | 124,180.00 |
| Balance c/fwd | 150,500.00 | 66,720.00 | 387,000.00 | |
| 2014 Year of Assessment | ||||
| BP: 1/01/2014 – 31/12/2014 | ||||
| Balance in Pool b/fwd | 150,500.00 | 66,720.00 | 387,000.00 | |
| Capital Allowance | 45,150.00 | 13,344.00 | 43,000.00 | 101,494.00 |
| Balance c/fwd | 105,350.00 | 53,376.00 | 344,000.00 |
Computation of Capital Allowance
2012 to 2014 Years of Assessment
| Year of Assessment | 2012 | 2013 | 2014 |
| Basis Period | 1/01/2012 – 31/12/2012 | 1/01/2013 – 31/12/2013 | 1/01/2014 – 31/12/2014 |
| GH¢ | GH¢ | GH¢ | |
| Adjusted profit | 315,000.00 | 298,000.00 | 328,000.00 |
| Less: Capital Allowance | 89,600.00 | 124,180.00 | 101,494.00 |
| Chargeable income | 225,400.00 | 173,820.00 | 226,506.00 |
Chargeable Income shared to Partners as follows:
| Ace | Brace | Crate | |
|---|---|---|---|
| GH¢ | GH¢ | GH¢ | |
| 2012 Year of Assessment | |||
| BP: 01/01/2012 – 31/12/2012 | |||
| Chargeable Income | 93,916.67 | 75,133.33 | 56,350.00 |
| 2013 Year of Assessment | |||
| BP: 1/01/2013 – 31/12/2013 | |||
| Chargeable Income | 115,880.00 | – | 57,940.00 |
| 2014 Year of Assessment | |||
| BP: 1/01/2014 – 31/12/2014 | |||
| Chargeable Income | 151,004.00 | – | 75,502.00 |
- Topic: Income Tax Computation
- Series: AUG 2015
- Uploader: Samuel Duah