Under what condition should Research and Development Expenditure be capitalised?                                                (2 marks)

The Income Tax Act, 2015 (Act 896), provides under subsection (2) of section 100 a list of worthwhile causes approved by Government that a person can deduct in the course of doing business.
Required:
Explain THREE (3) worthwhile causes and the basis of approval by the Commissioner-General of GRA?                   (3 marks)

Sekyiwaa Annam Industries Limited manufactures personal hygiene soaps and related products at their factory in Takoradi. The company commenced business operations on 1 April 2016 and had an assessed loss of GH¢150,200 for the period ended 31 December 2016.

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:

• 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.
• Net interest received on bank deposits from Ghana Commercial Bank of GH¢10,028. Withholding tax of 8% has been deducted.
• 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.
• 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).
• Depreciation of fixed assets of GH¢57,000.
• Replacement of two motor vehicle engines costing GH¢51,000.
• 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. 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.
• 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 Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 using all the available information.                                                                                                                               (8 marks)

ii) Calculate the chargeable income of Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 and tax payable.                                                                                                                                                                          (6 marks)

XYZ Ltd runs a business with a basis period from January to December each year. The following information is relevant to its business operations for 2016 year of assessment.
Chargeable Income from business operations GH¢40,000. The chargeable income was arrived at after the following adjustments were made:
Financial cost incurred on hedged transactions GH¢150,000.
Financial gain from hedged transactions GH¢ 60,000.
Required:
i) Compute the financial cost to be allowed in 2016 year of assessment.                                                                           (6 marks)

ii) Advise management on the above results.                                                                                                                      (4 marks)

Bambara Ltd has the following summarized income statement relating to 2015 year of assessment:

Upon a closer scrutiny, the following came up:
i) Dividend net of withholding tax received from A Ltd was GH¢10,000. The amount received was added to revenue above. Bambara Ltd has 10% equity interest in A Ltd.
ii) Bad debts of GH¢1,000 was recovered. This was adjusted to the Income Surplus Account.
iii) A penalty of GH¢2,000 was paid and has been added to operating cost to determine the net profit as disclosed.
iv) Capital allowance agreed with Ghana Revenue Authority was GH¢1,000.00 and depreciation of GH¢1,300 was added to operating cost.
v) Taxes paid in previous quarters amounting to GH¢1,200 was added to operating cost to determine the net profit.
vi) It came to light that an amount of GH¢11,400 net of 5% withholding tax relating to supply of goods was not brought into the accounts at all on account of omission. The withholding tax was certified correct.
Required:
Determine the tax payable by Bambara Ltd and comment on any FOUR reasons for the inclusion and or non-inclusion of the transactions in the determination of income.                                                                                                               (10 marks)

Below is the Profit or Loss Accounts of Osu Mart Ltd, a manufacturing company in Accra for the year ended 31st December, 2014 submitted to the Commissioner of Domestic Tax Revenue Division of the Ghana Revenue Authority on 30th April, 2015.

vi) Capital Allowance is agreed as GH¢65,240
Required:
a) Compute the chargeable income of the company for 2014 Year of Assessment.                                                         (18 marks)

b) State the significance of the Auditor’s Certificate to Examination of Accounts.                                                           (2 marks)