Question
Logitek (Pty) Ltd. is a retailer of industrial machinery. The machinery sold by Logitek (Pty) Ltd. is purchased from local manufacturers. In recent years, Logitek
Logitek (Pty) Ltd. is a retailer of industrial machinery. The machinery sold by Logitek (Pty) Ltd. is purchased from local manufacturers. In recent years, Logitek has also started manufacturing machines for the retail market. Logitek has two retail outlets: one in Durban and one in Johannesburg. The manufacturing operation as well as bulk storage of stock is housed in a building in Johannesburg. The following information is provided for the year ended 28 February 2023.
R | |||
Sales | 25 | 000 | 000 |
Purchases at cost: | |||
Machines for retail | 10 | 000 | 000 |
Components for the manufacturing process | 2 | 000 | 000 |
Consumable stores | 500 | 000 | |
A new manufacturing machine (for use in the manufacturing process) | 200 | 000 | |
Spare parts for the manufacturing machine | 30 | 000 | |
In June 2022, Logitek (Pty) Ltd. removed one of the machines that it had acquired for resale from stock and installed it in the factory for use in the manufacturing process. The machine had been acquired in March 2022 for R100 000. At the time that it was taken out of stock, the machines market value was R130 000. | |||
Opening stock on hand at 1 March 2022 was as follows: | |||
Machines for retail | 2 | 000 | 000 |
Work in progress (i.e. machines being manufactured) | 500 | 000 | |
Consumable stores | 20 | 000 | |
Labour and direct overhead costs in respect of the manufacturing process | 4 | 000 | 000 |
Stock on hand (at cost) at 28 February 2023 comprised of:
A certain model of machine was considered to be obsolete. There were two such machines on hand. The machines had cost R20 000 each. The commissioner will allow these machines to be reflected at 50% of their cost.
| 1 | 220 28 22 30 150 | 000 000 000 000 000 |
5
Other tax allowances and deductions for the year | 2 800 | 000 |
Purchase of a new printer for cash | 32 | 000 |
(Purchased and brought into use on 30 June 2022) | ||
Delivery and transport charges | 1 | 000 |
Installation costs | 750 | |
(The installation costs were incurred when an electrical power point had to be relocated to provide power to the printer) | ||
Foundation alterations | 1 | 500 |
(Strengthening floor to hold the weight of the printer) | ||
The company commenced with the erection of its own factory on 1 December | ||
2022. At 29 February 2023 (the companys year-end), R3 000 000 (excluding VAT) had been incurred on the construction of the factory. | ||
The factory was completed on 31 December 2023 at a total cost of R18 000 000 (excluding VAT). Juba Ltd. used the factory for the first time in January 2023. | ||
The company registered its environmentally friendly logo as a trademark to be included on all future product packaging. | 38 | 800 |
REQUIRED:
Compute Logitek (Pty) Ltds taxable income for the year ended 28 February 2023.
Ignore VAT.
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