QUESTION 1

Kojo Apio was appointed Managing Director of Yoewa Ltd on a basic salary of GHC20,000 a year
with effect from 1st January 2012.
The contract provided for an annual increase of 20% each year.
In addition, he was entitled to the following allowances:
GHC
a) Medical allowance 4,000
b) Entertainment allowance 2,000
c) Responsibility allowance 3,000
d) Bonus 30% of basic salary

The company provided him with a soft furnished accommodation for which GHC3,500 is deducted
from source every month. He is also provided with a car with free supply of fuel for official use.

Mr. Apio contributes to the Social Security Scheme and the employer also contributes 9.5% of his
basic pay to a Provident Fund.

Mr. Apio lives with two (2) wives, and four children who are in approved basic schools in Germany.

He has two Life Insurance Policies with the following details:

Company Maturity Sum Annual Premium

GHC_____ GHC_____
Nsem Assurance (1) 80,000 2,450
Kowtow Insurance (2) 45,000 4,740

Required:

a) Compute the chargeable income of Mr. Apio for the 2012 year of assessment.
(12 marks)
b) Determine his (take home) pay for the 2012 year of assessment.
(8 marks)
(Total: 20 marks)
Tax Rate
GHC %
First 1,200 0
Next 420 5
Next 1,104 10
Next 23,196 17.5
Exceeding 23,196 25

ICAGP4.40513 Page 1 of 4
QUESTION 2

The Managing Director of Chuki Insurance Ltd presented a draft of the companys financial
statement for the year end 31st December 2012. The details are as follows:

GHC
Premium returned 14,000
Reinsurance recoveries 43,000
Gross premium received 980,000
Reinsurance premium paid 25,000
Claims settled and paid 400,000
Commission to agents 18,000
Dividend received 22,500
General & administration expenses 44,800
Investment in Treasury Bills 737,200

Reserve for unexpired risk created for the previous year amounted to GH474,500. It is the policy of
the company to estimate reserve for unexpired risk at 40% on premium earned during the year.

The company was granted a total capital allowance of GHC137,800.

Required:

a) Determine the Chargeable Income for Chuki Insurance Ltd on the basis that it deals in short
term business. (15 marks)

b) A person who receives a taxable gift shall within 30 days of receipt furnish the Commissioner
with a return in writing.

Required:

Outline the content of such a return. (5 marks)

(Total: 20 marks)

QUESTION 3

(a) A person registered for VAT may take credit for input tax incurred in furtherance of his
business.

Required:

State the circumstances under which a VAT registered person will not be entitled to take credit for
input tax incurred for business purposes.
(5 marks)

ICAGP4.40513 Page 2 of 4
(b) Describe what constitutes taxable supply of goods under the VAT Act 1998 (Act 248).
(5 marks)

(c) State and explain the different rates of VAT currently in force.
(8 marks)

(d) Under what circumstances will an expenditure incurred by a person engaged in business be
allowed as a deduction in the ascertainment of his business taxable income?
(2 marks)

(Total: 20 marks)

QUESTION 4

a) Mention and discuss the two (2) main processes by which tax disputes are resolved under the
Internal Revenue Act 2000 (Act 529).
(5 marks)

b) In each of the scenarios below, state whether or not the expenditure will be allowed as
deduction from the business income of sole trader and why.

i. Rent for accommodation hired for the managing proprietor

ii. Penalty for not filing tax returns on time

iii. Cost of goods withdrawn by the proprietor

iv. Payment to the local authority in respect of rates

v. Cost of air ticket incurred for the medical treatment of the mother of the proprietor.

(10 marks)

c) Terrisco Ltd is a self-assessed entity. During the year 2012, the company submitted an amount
of GHC750,000 as its estimated chargeable income.

At the end of 2012 year of assessment, the actual chargeable income recorded by the company
was GHC1,525,000.

The Revenue Authority has notified the company of their intention to impose a penalty due to
the information provided.

Required:

Determine the penalty payable by Terrisco Ltd. (5 marks)

(Total: 20 marks)

ICAGP4.40513 Page 3 of 4
QUESTION 5

Hypec Manufacturing Company Ltd, producers of household utensils for both the local and export
markets, commenced business on 1st May 2008.

The company acquired the following chargeable assets for use in the business which is located at
Tarkwa in the Western Region.

Date of Purchase Cost

GHC
Buildings May 2008 200,000
Office equipment June 2008 15,000
Computers/Software July 2008 400,000
Toyota saloon car Sept. 2008 40,000
Office furniture Feb. 2009 8,000
Nissan bus April 2009 50,000
Toyota Land Cruiser May 2011 80,000
Data Handling Machines July 2011 90,000
Toyota bus Oct. 2011 70,000
Office equipment Nov. 2011 9,000

The Toyota saloon car was sold on 1st September 2010 for GHC24,000.

The Nissan Bus was involved in an accident in October 2010, and on 15th December 2010.
GHC22,000 compensation was received from the insurance company.

Some of the office equipment bought in 2008 were sold in July 2010 for GHC17,000, and
GHC20,000 was paid in December 2011 for extension works on the building.

Additional information

1. The companys sales and adjusted profits during the period were as follows:

Period Profit Export Sales Local Sales

GHC GHC GHC
Period to 31/12/2008 100,000 309,000 3,000,000
Year to 31/12/2009 180,000 450,000 4,500,000
Year to 31/12/2010 108,571 600,000 6,000,000
Year to 31/12/2011 450,000 1,000,000 9,000,000

Require:

Determine the chargeable incomes and tax liability of Hypec Manufacturing Company Ltd for all the
relevant years.

20 marks

ICAGP4.40513 Page 4 of 4