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Calculate the current tax expense for the year ended 3 0 April 2 0 2 4 . Extract of information from the Statement of Profit
Calculate the current tax expense for the year ended April
Extract of information from the Statement of Profit and Loss and Other Comprehensive Income for the year ended April :
RevenueFair value gain on investment property,Cost of sales,,Administration expenses,Salaries and wages,,Warranty costs,
Additional information:
The investment property had a fair value of R on April The investment property was initially purchased for R and is measured on the fair value model in terms of IAS Investment properties.
Administration expenses include, amongst other items, the following:
A penalty of R for late submission of VAT returns to the South African Revenue Services.
These are prohibited as a deduction for income tax purposes.
Water and electricity expenses of R These are deductible at the earlier of payment or accrual.
The movement in the allowance for credit losses account is included in administration expenses. Trade receivables amounted to R at April and the allowance for credit losses was R at April and R at April In accordance with section j of the Income Tax Act, SARS allows of the loss allowance on trade receivables as a deduction for income tax purposes. Bad debts of R were written off during the current year.
The depreciation expense relates to the following assets:
Equipment
All equipment was originally purchased on February at a cost of The equipment is depreciated on the straightline method over a useful life of years with a residual value of R SARS allows wear and tear at a rate of per annum not apportioned for part of a year There have been no additions or disposals of equipment.
Vehicles
On September a vehicle was sold for a cash amount of R This vehicle had a carrying amount of R and a tax base of R on the date of sale. Depreciation of R on all vehicles was correctly accounted for in the trial balance above, of which R relates to the vehicle sold. SARS granted wear and tear allowances of R on all vehicles for the current reporting period, including relating to the vehicle sold.
The carrying amount of all vehicles was correctly determined to be at
April The relevant tax base was R on April
The vehicles sold were not removed from the assets section in the statement of financial position neither was the tax base of the sold vehicle removed from the tax bases.
Harmony Innovations CC sells energyefficient washing machines with a month warranty which allows customers to return goods that have manufacturing defects for repairs. The warranty provision was correctly estimated to be R on April This was an increase from the provision of R recognised for the year ended April All warrantyrelated costs were correctly recognised in the warranty costs account. SARS allows warranty costs to be deducted when they are actually incurred ie when goods are returned and repaired
Harmony Innovations CC is in the process of developing an advanced smart thermostat system designed to optimise energy usage within residential and commercial buildings. R was expensed as research costs in the previous year and R development costs were capitalised on November Development costs are amortised over years to a nil residual.
SARS allows a allowance on research and development costs. SARS makes no distinction between research and development costs.
Harmony Innovations CC is seeking to purchase an advanced energyefficient HVAC Heating Ventilation, and Air Conditioning system for its main office building in June the next financial year
The total anticipated cost of the energyefficient HVAC system, including VAT is R The HVAC system has a useful life of years for accounting purposes, whilst SARS will allow an allowance of over years. As an incentive to companies to invest in energyefficient infrastructure and adopt sustainable practices within their operations, the tax allowances are calculated based on of the initial cost of the HVAC system.
The balance on the deferred tax liability account amounted to R as at April
There are no other taxable or deductible temporary differences other than those listed above.
Profit before tax was correctly determined to be R for the financial year ended April
A corporate tax rate of and a capital gains inclusion rate of are applicable.
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