S.D.

DOMBO UNIVERSITY OF BUSINESS AND INTEGRATED DEVELOPMENT

STUDIES
SCHOOL OF EDUCATION AND LIFE-LONG LEARNING
DEPARTMENT OF BUSINESS EDUCATION
EBS 508: ADVANCED TAXATION: Practice Questions
CORPORATION TAXATION
Q1. The following is the profit and loss account of Nipa Business Consultancy Limited for the
year ended 31/12/17
GH¢ GH¢
Gross Profit b/f 22,966.70
Rent Income 650.00
Less Expenses:
Salaries and wages 5,172.75
Subscription and donations 305.00
Audit fees 450.00
Depreciation 1,450.00
Legal expenses 300.00
Office rent 865.50
Repairs and maintenance 750.00
Bank charges 677.72
Registration and license 150.00
Electricity and water 865.55
Sundry expenses 575.60 11,562.12
Net Profit 12,054.5
Notes:
1. Bank charges include loss on exchange rate adjustment of GH¢576.32
2. Sundry expenses include quarterly income tax paid amounting to GH¢450.00
3. Subscription and donations include miscellaneous donations of GH¢74.80
4. Capital allowances for the year amounted to GH¢2,232.40
5. Unutilized capital allowance brought forward was GH¢1,540.00
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You are required to compute the company’s chargeable income and tax payable for the 2017
year of assessment, given that the corporate tax rate is 25%
Q2. Below is the profit and loss account of Nyameye manufacturing company limited for the
year ended 31/12/17
GH¢ GH¢
Gross Profit B/f 495,000.00
Rent income 125,000.00
620,000.00
Deduct:
Management salaries 35,000.00
Staff salaries 17,000.00
Hire of equipment 14,500.00
Depreciation 6,000.00
Causal labour 8,400.00
Office rent 7,200.00
Vehicle repairs 15,600.00
Business promotion 4,200.00
Donations 9,100.00
Repairs to factory premises 22,800.00
Office expenses 18,000.00
Bad debts 59,000.00
Advertisements 1,200.00 218,000.00
Net Profit 402,000.00
Notes:
1. Causal labour is made up as follows: GH¢
Factory hands 5,000.00
Wages on managing director’s private house 3,400.00
2. Vehicle repairs is made up as follows
Cost of new engine 3,600.00
Fuel and lubricants 7,000.00
Tyres and Tubes 5,000.00
3. Business promotions is made up as follows:
Wedding reception for MD on his wedding day 2,800.00

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 Cost of entertaining business partners 1,400.00
4,200.00
4. Donations
Kotoko football club 6,000.00
National trust fund 100.00
Bereaved members of staff 3,000.00
5. Repairs to factory premises
Cost of new terrazzo floor 12,800.00
New iron gate for factory 8,000.00
Cracks in the walls 2,000.00
6. Office expenses
New personal computer 15,000.00
Stationery and stores 3,000.00
7. Advertisement
Cost of neon sign 1,200.00
8. The company commenced business on 1/1/17 and has only one second-hand delivery
van which was bought on 1/7/17 at a cost of GH¢18,000.00
9. During the year, a new engine was purchased for the vehicle at a cost of GH
¢3,600.00 as indicated in note 2 above.
10. Office rent paid is for two years advance.
11. The company’s factory building was constructed in 2016 at a cost of GH
¢5,000,000.00
12. The company is located at Ntensere in the Kintapo District of the Bono region.
Required: Determine the company’s tax liability for 2017 year of assessment
Q 3. The following information relates to TK Company Limited
Net profit before tax 22,000.00
Depreciation 7,000.00
General bad debts written off 1,500.00
Unrelieved loss 2,000.00
Total financial gain 7,000.00
Total financial cost 50,000.00

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Capital allowance 12,000.00
Required:
Determine the chargeable income after adjusting for financial gain and cost. Determine the
tax payable
Q 4. Mr. Kofi Owusu who has been operating a business, ‘COSMICS PLC’, for several years in
Wa present the following Profit and Loss account
COSMICS PLC
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2017
GH¢ GH¢
Gross Profit b/d 479,500
LESS:
Research and development 2,000
Rent 62,000
Staff salaries (fresh graduate GH¢1,620) 38,000
Management salaries 52,000
Interest expense 17,000
Repairs and maintenance 4,000
Entertainment 8,000
Donations 31,000
Vehicle expenses 23,000
Travelling and transport 10,000
Legal fees 17,500
Bad debts 11,800
Depreciation 24,200
Advertisement 32,000
Medical expenses 28,000
Loss on sale of fixed assets 5,000
Training expenses 12,000
Total expenses - 377,500

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NET PROFIT 102,000
The following additional formation is available to you:
1. Research and development: An amount of GH¢500 was spent on acquiring equipment for
the purpose of the business.
2. Rent: This is in respect of building, part of which is used by Kofi as residence. It is
assumed that the residential portion of the building covers 65% of the total cost of the
rent.
3. Repairs and maintenance: An amount of GH¢3,000 was incurred in maintenance of an
asset which had a written down value of GH¢17,400 at the end of the year.
4. Entertainment: This was in respect of the expenses incurred during the wedding of Mr.
Kofi's grandson.
5. Included in donations is an amount of GH¢ 13,000 given to the Kumasi festival
organizing committee
6. Legal fees: This was in respect of a suit against the enterprise for defaulting on tax
payment.
7. Medical expenses: An amount of GH¢ 10,000 was spent on Kofi's son when he was
hospitalized.
8. Management salaries: This is made up as follows:
Proprietor GH¢ 28,000
Chief Accountant GH¢ 15,000
Proprietor's Son GH¢ 9,000
Given the qualification of the proprietor's son, he would have earned GH¢ 8,000 on the
open market.
9. Staff Salaries: The total workforce of Mr. Kofi Owusu is made up of twenty (20)
employees out of which two (2) employees are fresh graduates from a tertiary institution.
10. Advertisement: This is made up as follows:
Permanent Neon Sign GH¢ 10,000
Newspaper advertisement GH¢ 14,000
Advertisement Tax GH¢ 8,000
11. Bad Debt
Specific debts written off GH¢ 2,200
General provision GH¢ 8,000
Specific provision GH¢ 1,600
12. Training expenses: This is made up of the following:
ICA (GH) Seminar attended by the Chief Accountant GH¢ 3,500
Astrological society of FRANCE dues paid by Kofi GH¢ 8,500
13. Interest Expense: Out of the total capital of GH¢ 860,000, GH¢ 720,000 was debt capital.
14. Vehicle Expenses: These are on the car used by Kofi. It is estimated that the vehicle is

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 used evenly for business and private purposes. The travelling and transport expenses
were in respect of Kofi medical treatment in London.
15. Capital Allowances: Assume capital allowance on all assets for the year was GH¢ 47,000
16. Closing stock of GH¢ 25,000 was obtained using LIFO basis. If FIFO had been applied, the
figure would have been GH¢ 22,000.
17. The good nature of Kofi’s business, he won the 2016 best business award. Apart from the
prize attached to the award, he received the following gifts;
3 plot of land value at GH¢ 5,500 from the local Odikro
Cash of GH¢ 3,200 from local customers, Toyota car value at GH¢ 4,500 from local
suppliers.

Required: You are required to determine Kofi’s chargeable Income and Tax Liability for
2017 year of Assessment. Ignore Kofi’s personal reliefs.

Q5. Saamesco Industries Limited manufactures personal hygiene soaps and related products at
their factory in Kumasi. The company commenced business operations on 1 April 2016 and had
an assessed loss of GH¢ I50,200 for the period ended 31 December 2016.
i. The company recorded a net profit of GH¢762,800 for the year ended 31 December
2017 after taking into account the following transactions in the income statement:
ii. Gross rental income of GH¢ 180,000 received from the leasing of one wing of the office
building. The rental income portion constitutes 10% of the office building.
iii. Net interest received on bank deposits from Ghana Commercial Bank of GH¢10,028.
Withholding tax of 8% has been deducted.
iv. The registration of Trademarks at a total cost of GH¢ 75,000 in respect of the
Company’s personal hygiene soaps that is to last for 10 years. The research and
development expenses incurred in connection with these soaps amounted to GH¢ 15,000
and the company intends to expense it. The legal costs incurred to complete the
registration of the Trademark was GH¢5,000.
v. A donation of GH¢ 120,000 worth of furniture was made to a local government assisted
school as part of Company's corporate social responsibility programme which was duly
acknowledged by Ghana Education Service (GES).
vi. Depreciation of fixed assets of GH¢57,000.
vii. Replacement of two motor vehicle engines costing GH¢51,000

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 viii. Exceptional costs amounting to GH¢150,000 as a result of the production manager
sustaining an injury whilst working on one of the production lines in the factory. The
production manager was rendered incapacitated and resigned as a result of the incident.
ix. GH¢35,000 of the costs relate to a payment made to the production manager as
severance pay. GH¢110,000 was used to acquire additional computers. The remaining
GH¢5,000 of the costs represent fines imposed by the Factory Inspectorate Department
of the government following the incident.
x. Purchases of Computer Server for accounting and human resource needs at a cost of
GH¢20,000
Additional information
Details of Company's other fixed assets, at cost, are provided below. These were all
acquired/constructed during the year to 31 December 2016:
Cost (GH¢)
Factory Building 800,000
Plant and Machinery 510,000
Office Building 420,000
Furniture and Office Equipment 60,000
Motor vehicles (Goods Vans) 130,000
Computers 30,000
Required:
i. Calculate the capital allowances claimable by Saamesco Industries Limited for the year
ended 31 December 2017 using all the available information.
ii. Calculate the chargeable income of Saamesco Industries Limited for the year ended 31
December 2017 and tax payable.
Q6. The following is an extract of the profit and loss account of Denis Ltd for the year ended 31-
12-2017.
GH¢ GH¢
Gross profit 940,000
Net dividend received 15,500
Profit on sales of motor van 2,000 17,500
957,500
Less: Operating Expenses
Motor Expenses 140,000

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 Entertainment 6,000
Salaries and Wages 210,000
Rent 97,500
Repairs 97,500
Fines and Legal fees 43,500
Training expenses 690
Postage and Telephone 30,000
Bad debt 7,480
Interest expense 12000
Depreciation 24,500
Advertising 42,500
Financial expenses 61,380
Donation and Subscription 73,250
Audit fees 105,700 854,500
NET PROFIT 103,000
Addition information:
i. Motor expenses include: GH¢
Purchase of new engine 89,500
Fuel and lubricant 50,500
The engine was purchased to maintain a vehicle which had a written down value of GH
¢200,000
ii. Entertainment of GH¢ 6,000 was in respect of the birth day ceremony of MD's son.
iii. Out of GH¢ 97,500 of repairs incurred during the year, GH¢10,000 was used in repairing the
motor vehicle which had a written down value of GH¢200,000.
iv. The wages and salaries in the account is for 208 employees out of which 2 of them are fresh
graduates with Degree from University of Cape coast. Each of the fresh graduates was paid GH
¢8,000 for. The wage rate of a degree holder is GH¢ 5,000.
v. Out of the total capital of GH¢ 320,000, GH¢ 170,000 was debt capital.
vi. Fines and legal fees include: GH¢
Fines paid in respect of the company's driver over-speeding 9,500
Fine for late filling of annual returns 10,000
Collection of debts 6,000
Acquisition of new lease 18,000
vii. Donation and Subscription: GH¢

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 Trade association 2,500
Political Party (DDP) 37,000
Periodicals and journals 33,750
viii. Net dividend was the income received from one of the subsidiaries of Denis Ltd.
ix. Financial expenses: GH¢
Cost of issue of shares 20,000
Bank charges 41,380
x. Bad Debt: A specific debt written off was GH¢ 4,000 and the rest was general provision.
xi. Capital allowance claimable is GH¢ 50,000
xii. Mr. Denis bought a building in 2012 for GH¢ 12,000 to expand his business operations.
He spent GH¢1,500 to repair the building, this cost as been added to another asset cost.
2016 he decided to sell the building and out of that he engaged a contractor to renovate
the building so as to attract buyers. He spent GH¢1,400 on the renovation. He engaged a
sales agent who was able to sell the building in July, 2017 for GH¢ 35,000 but charged
commission of 10% on the sales value.
Required: You are required to calculate the chargeable income of Denis Ltd for 2017 year
of Assessment.
Q7. Michael Kwabena Adu has been operating a trading business "Sobolo" for several years in
Ninko Township in the Greater Accra region. He presented the following statement for the year
ended 31 December, 2017.
GH¢ 000 GH¢ 000
Sales 540,000
Cost of Sales 200,000
Gross Profit 340,000
Discount received 4,000
344,000
Less:
Management Salaries 54,000
Repairs 48,000
Entertainment 12,000
Donations 10,000

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Legal Fees 11,500
Unrealized Exchange Loss 24,000
Bad Debts 24,200
Loss on Sale of Equipment 6,000
Depreciation 47,000
Medical Expenses 64,000
Financial cost 90,000
Sundry Expenses 72,000
Advertising 15,000
Rent 80,000
Interest on Loan 18,000
575,700
Net Profit (Loss) (231,700)
The following additional information is available to you:
i. Repairs: An amount of GH¢12,000 was used to repair two computers which had a written
down value of GH¢ 270,000.
ii. Rent: This was in respect of a building part of which was used for the business and
private purposes. It has been agreed with the Commissioner that the business is
occupying 20% of the floor space.
iii. Management Salaries: This is made up as follow:
GH¢ 000
Michael Adu 40,000
Senior staff 12,000
Michael's first son 2,000
iv. Entertainment: This was in connection with an end of year party organized for members
of staff and customers of the firm.
v. Medical expenses: An amount of GH¢ 18,000 was spent on the dependants of members of
staff. The rest represent the medical bills of Michael’s family.

vi. Bad Debt GH¢'000

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 Special provisions 2,000
General provisions 10,000
Actual Debts Written-off 12,200
vii. Interest on loans is in connection with uncollectible staff loans written-off. The staff
concerned is no longer in the employment of the firm.
viii. There were no financial documents evidencing an amount of GH¢64,000 included in
Sundry expenses.
ix. Assume Capital allowance of GH¢34,000.
x. Analysis of sales: %

Accra 45
Export 40
Ninko and its environs 15
ix. Amount of GH¢ 90,000 in respect of financial cost were reckoned in determining profit
for the year.
Required: Determine the chargeable income for the 2017 year of assessment and
calculate the tax liability of Michael Kwabena for the 2017 year of
assessment.
Q8. Adom Hotel Ltd is located at Jirapa in the Upper West Region, Below is its income
statement for the year ended 31st December, 2017.
GH¢ GH¢
Gross profit as per account 1,145,000
Dividends 10,000
Total gross income 1,155,000
Less Operating Expenses:
Advertisement 5,000
Research and Development cost 2,000
Subscription and donation 10,000
Depreciation 15,000
Repairs and Maintenance 3,750
Traveling and transport 25,000

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Audit fees 5,000
Entertainment 10,000
Training expenses 30,000
Wages and salaries (fresh graduate 10,000) 50,000
Bad debt 10,000 165,750
Net income 289,250

Additional information:
1. One half of the research and development cost of the Adom Hotel Ltd relate to five (5) days
product and service research, the remaining amount was in respect of Astrological research.
2. Subscription and donation cost of GH¢ 8,500 was donation to flood victims, the remaining
amount was in respect of donation to Aduana Football Club.
3. Entertainment of GH¢ 10,000 was in respect of the birth day ceremony of MD's son
4. The company acquired equipment with GH¢ 75,000 in the course of the year
5. 25% of the traveling and transport was not related to business trips.
6. Closing stock of GH¢ 25,000 was obtained using LIFO basis. If FIFO had been applied, the
figure would have been GH¢ 22,000.
7. In 2013, the management of the hotel acquired premises in Jirapa Township for GH¢ 9,000.
The premise was underutilized so the management decided to sell the premises in 2016 for GH¢
26,000 after incurring renovation and advertisement cost of GH¢3,400 and GH¢1600
respectively.
8. GH¢ 25,000 of training expenses was related to ICA- GH seminar attended by the
Accountant. The remaining amount could not be substantiated.
9. The total works force of Adom Hotel Ltd is one hundred and twenty five (125). This includes
five (5) fresh graduates.
10. Included in the audit fees is GH¢ 1,000 related to general provision made by Adom Hotel
Ltd.
11. The bad debt is a specific debt proven to the satisfaction of the Commissioner-General.
Required: Using the income Tax Act 2015 (Act 896) where applicable, compute the tax
liability of Adom Hotel Ltd for the 2016 year of Assessment.

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Q9. .Paul Ewusi, a self-employed single parent with two children attending a private University
in Ghana trades as Paul Ewusi Enterprise. He commenced business on 1st January 2017 and
submitted the following extracts of his financial statements for the year ended 2017.
GH¢ GH¢
Gross Profit b/d 20,420
Interest on savings account 2,020
Gifts received 1,500
Interest on treasury bills 790
Auditor's fees 800
Depreciation of assets 1,200
Computers purchased 2,500
PAYE paid on his personal salary 450
Employee social security contribution (other staff) 396
Office rent 2,400
Personal salary (net) 7,200
Other staff wages 4,300
Stationery 852
Vehicle purchased for CEO's personal use 18,000
Transport 1,300
Net Loss (14,668) -
Total 24,730 24,730

Required: Determine the Chargeable Income of Mr. Paul Ewusi for 2017 year of Assessment.

TAXATION OF INSURANCE BUSINESS AND FINANCIAL INSTITUTIONS

1. The Managing Director of SUSUKA Insurance Ltd presented a draft of the company's
financial statement for the year end 31st December 2017. The details are as follows:
GH¢

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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 GHC 474,500. 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 GH¢ 137,800.
Required: Determine the Chargeable Income for SUSUKA Insurance Ltd on the basis that
it deals in general business and its Tax liability.
2. Presented below are extracts of the accounts of Secured Future Life Insurance Company
Limited for the year ended 31 December 2017
GH¢
Interest received on treasury bills 122,000
Interest on investments 150,000
Dividend income 20,400
Gross premium received 1,640,000
Claims paid during the year 840,000
Income tax paid 140,000
Commission to agents 48,000
Salaries and wages 40,000
Director remuneration 18,000
Stationary 22,000
Utilities 30,000
Capital allowance 30,000

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Required: You are required to determine the chargeable income for the company and its
Tax liability.
3. Sea Never Dries Insurance Company Limited has been in business for several years
making accounts to 31st March each year. Below are extracts from the accounts for the
year ended 31st March, 2017.
GH¢
Gross premiums received 68,100
Operating lease rental 3,600
Auditor remuneration 2,500
Bad debt 980
Utilities 3,816
Commissions to agents 480
Claims settled and paid 24,600
Re-insurance recoveries 16,000
Re-insurance premiums paid 8,000
Premiums returned 3,600
Dividend received 18,400
Interest on treasury bills 32,000
Capital allowance claimed 25,474
NOTEs:
1. Reserve for unexpired risk is at 40%.
2. Reserve for previous year is GH¢ 34,000.
3. The company undertakes general insurance business.
Required:
a. Determine the taxable income of the company.
b. What would be the company's taxable income if it were a Life insurance company

4.Progressive Insurance Company Limited submitted the following accounts for the year ended
30th September, 2017. Details are as follows:
GH¢

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Gross premiums received 380,000
Premiums returned 18,500
Reinsurance premiums paid 26,000
Claims settled and paid 185,000
Reinsurance recoveries 124,000
Commissions to agents 1,200
General administrative expenses 82,000
Interest on Investments 18,000
Dividends received (Net) 41,000
Reserves for previous year 210,000
Capital allowance for the year 29,100
Required:
Determine the chargeable income of the company on the basis of the information provided and
its tax liability.
5.Agyenkwa Insurance Company Limited summited the following financial details for the year
ended 31st December 2017
GH¢
Gross Premium 2,760, 000
Premium Returns 57,000
Claims Paid 960,000
Re-insurance Recoveries 54,000
Commission Paid 72,000
Re-insurance Premium Paid 162,000
General and Administration expenses 1050, 000
Interest received on loan 183,000
Interest on Investment 225,000
Depreciation for the period 600,000
The Assets Includes:
Motor Vehicle at cost 75,000

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Furniture and Fitting at cost 420,000
Building at cost 1,950,000
Provision for unexpired risk is 40%
Required:
Determine the chargeable income of the company on the basis of the information provided and
its tax liability.

6.All is Well Insurance Company Limited submitted the following accounts for the year ended
31* March, 2017. Details are as follows:
GH¢
Gross premiums received 380,000

Premiums returned 18,500

Reinsurance premiums paid 26,000

Claims settled and paid 185,000

Reinsurance recoveries 124,000

Commissions to agents 1,200

General administrative expenses 82,000

Interest on Investments 18,000

Dividends received (Net) 41,000

Reserves for previous year 210,000

Capital allowance for the year 29,100

Required:
Determine the chargeable income of the company on the basis of the information provided and
its tax liability.

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Question 2. Below is the returns of Glamour Insurance Company Limited for 2010 year of
assessment

GENERAL INSURANCE

GH¢ GH¢

Gross Premium Received 250,000

Reinsurance Recoveries 16,000
Interest on loans 75,000
Investment income 35,000
Dividends received 45,000
421,000
Reinsurance premium 50,000
Closing reserves 25,000
Income tax paid 17,000
Total claims paid 46,000
Wages and Salaries 10,000
Depreciation 5,000
Motor vehicle repairs 11,000
Commission to agents 15,000
Advertisement 20,000
Stationery 6,000
Premium returned to clients 15,000
Office rent 9,000
Administrative Expenses 30,000 259,000
Net profit 162,000

LIFE INSURANCE
Dividends received 60,000

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Interest on treasury bills 40,000
Interest on loans 50,000
General admin expenses 15,000
Commission to agents 14,000
Wages and salaries 15,000
Legal fees 5,000
Depreciation 5,000
Office rent 6,000
Advertisement 10,000 70,000
Net Profit 80,000

Notes to the Accounts

i. The company’s policy is to provide 45% of Net Premium Income for unexpired risk.
ii. Capital allowances agreed with the Ghana Revenue Authority is GH¢ 10,000 with respect
to the short term insurance and GH¢ 5,000 for the life insurance
iii. The net premium for the year ended 31st December, 2009 was GH¢ 40,000

REQUIRED:
a. Compute the chargeable income of each department
b. Given a corporate tax rate of 25%, what will be the net tax payable for each department

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