May 2018 Q2 a.

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)