Question

Below is the income statement of Ashanti Feed Manufacturing Company Limited, located in

Akropong in the Ashanti Region of Ghana. The statement covers the year ended 31/12/2019.

GH¢000 GH¢ 000 Gross Profit 720,750

Rent Income 156, 250

Other Income 25,000

902,000

Less: Management Salaries 43,750

Staff Salaries 71,250

Hire of Equipment 18,125

Depreciation 7,500

Casual Labour 10,500

Office Rent 9,000

Vehicle Repairs 19,500

Business Promotions 5,250

Donations 11,375

Repairs of Factory Premises 28,500

Office Expenses 22,500

Bad Debts 73,750

Advertisements 1,500 322,500

Net Profit 579,500

Notes to the Accounts:

1. Other income includes profit on disposal of fixtures and fittings amounting to GH¢15,000,000.

2. Casual Labour is made up of Factory Hands and Wages of employees in Director’s Private

Property amounting to GH¢6,250,000 and GH¢4,250,000 respectively.

3. Vehicle Repairs includes cost of new engine of GH¢4,500,000, fuel & lubricants of

GH¢8,750,000 and Tyres and Tubes of GH¢6,250,000.

4. Donations consist of the following: Kotoko Football Club GH¢7,500,000, National Trust Fund

GH¢125,000 and Bereaved members of staff GH¢3,750,000 as part of funeral policy approved

by the board.

5. Business Promotions:

- Wedding reception for Director’s wedding day GH¢4,500,000

- Cost of entertaining business partners GH¢1,750,000

6. Repairs to Factory premises: GH₵

- Cost of New tiles for floor 16, 000,000

- New gates for factory 10,000,000 Repair of cracks in the wall 2,500,000

7. Office Expenses includes New personal computer and stationary amounting to

GH¢18,750,000 and GH¢3,750,000 respectively.

8. Office rent paid of GH₵ 9,000,000 represents two years rent for the period ending 31st

December 2019.

9. The written value of the company’s chargeable assets as at 31/12/2018 was as follows:

GH¢

Building (cost 6,250,000) 5,000,000

Motor Vehicles 22,500,000

Plant and Machinery 7,500,000

Computers 5,000,000

Required:

(a) Determine the Company’s Chargeable income for the 2019 year of assessment.

(15 marks)

(b) Calculate the tax liability of the company for 2019 assessment year, if any (5 marks)