Takyiwah Memorial Hotel Limited is a three-star hotel facility located at Anaji, a town in the Western Region of Ghana. The company commenced business operations on 1 February 2018 and had assessed loss of GH¢214,150 for the period ended 31 December 2018.

The company recorded a net profit of GH¢3,373,600 for the year ended 31 December
2019 after taking into account the following transactions in the income statement:

i. Gross rental income of GH¢228,050 received from the leasing of one floor of the office building. The rental income portion constitutes 25% of the office building.

ii. Net interest received on bank deposits from Absa Bank Ghana Limited of GH¢19,040. Withholding tax of 8% has been deducted.

iii. The registration of Trademarks at a total cost of GH¢106,000 in respect of the Company’s special fruit juice that is to last for 8 years. The research and development expenses incurred in connection with the drink amounted to GH¢21,000 and the company intends to expense it. The legal costs incurred to complete the registration of the Trademark was GH¢6,500.

iv. A donation of GH¢55,000 worth of computers was made to Fijai Senior High School as part of the company’s corporate social responsibility programme which was duly acknowledged by the Ghana Education Service (GES).

v. Depreciation of non-current assets of GH¢212,000.

vi. Replacement of blowers, compressors and condensing coils of some air conditioners costing GH¢84,000.

vii. Costs amounting to GH¢95,700 as a result of the restaurant manager sustaining an injury whilst working in the kitchen. The restaurant manager was rendered incapacitated and resigned as a result of the accident. GH¢83,000 of the costs relate to a payment made to the restaurant manager as severance pay. The remaining GH¢12,700 of the costs represent fines imposed by the Factory Inspectorate Department of the government following the accident.

viii. Purchases of air conditioners for some hotel rooms at a cost of GH¢111,000 (this amount was included in heating and cooling cost in the Statement of Profit or Loss).

Additional information
i) Details of the company’s other non-current assets, at cost, are provided below. These were all acquired/constructed during the year to 31 December 2018: cost GHS
Hotel Building = 2,500,000 Restaurant equipment =465,000 Office Building = 575,000 Furniture and fixtures =440,000 Motor vehicles =250,000 Computers and printers= 41,000

ii) The following acquisitions of non-current assets were made during the year to 31 December 2019 and were correctly included in the non-current assets schedule in the statement of financial position of the company:

Cost (GH¢)

Motor vehicles 180,000 Photocopiers 86,000

iii) In a bid to take advantage of the tax incentives in the Income Tax Act, Act 896, 2015, Takyiwah Memorial Hotel employed 8 fresh graduates out of the total work force of 102. Total salaries and wages paid to the fresh graduates in the 2019 year of assessment amounted to GHS 120,200.

Note:

Furniture and fixtures include air conditioners and television sets.

Required:

1. Calculate the capital allowances claimable by Takyiwah Memorial Hotel Limited for the year ended 31 December 2019 using all the available information.

2. Calculate the chargeable income of Takyiwah Memorial Hotel Limited for the year ended 31 December 2019 and tax payable.

Answer rating: 100% (QA)

1 Capital allowances claimable by Takyiwah Memorial Hotel Limited for the year ended 31 December ... View the full answer