Bluebond Ltd

The profit before tax of Bluebond Ltd is R1 341 000 for the year ended 28 February 2023. The following items have been correctly accounted for to derive this amount.

On 1 April 2022, an amount of R130 000 was deposited into the companys bank account. This amount relates to rental income for the period 1 April 2022 to 30 April 2023. The South African Revenue Service (SARS) accounts for taxation on the earliest of the date of receipt or accrual. The balances of the allowance for credit losses on 28 February 2022 and 28 February 2023 were R70 000 and R50 000 respectively. SARS allows an annual deduction of 25% of the accounting allowance for credit losses. Bluebond Ltd pays insurance premiums in advance. The prepaid balances for 28 February 2022 and 28 February 2023 amounted to R32 400 and R16 000 respectively. SARS grants deductions for expenses on the earliest of the date of payment or accrual.

Additional information:

A deferred tax asset of R5 628 was recognised at 28 February 2022. The balance on the deferred tax account was compiled as follows:

R

Allowance for credit losses

14 700 Dr.

Prepaid expenses

9 072 Cr.

Balance at 28 February 2022

5 628 Dr.

Assume there are no other temporary, non-taxable or non-deductible differences other than those clearly evident from the given information, and that sufficient future taxable profits will be available against which deductible temporary differences can be utilised. The tax rate was 28% in 2022 and decreased to 27% in 2023. Source: Daniels, J.C. 2023.