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Majuba ( Pty ) Ltd is a South African resident. It is a small business corporation that manufactures shoes. The company s financial year ends
Majuba Pty Ltd is a South African resident. It is a small business corporation that manufactures shoes. The companys
financial year ends on February. Majuba Pty Ltd is a registered vat vendor and the company does not apply IFRS for
financial reporting purposes.
The following information is available for the year ended February all amounts exclude VAT unless otherwise
stated:
Income Notes R
Sales
Dividend income
Expenses and costs
Purchase of raw material on July
Inventory
Bad debts
Doubtful debts
Salaries and wages
Legal expenses
Patent acquired
Repairs and maintenance
Electricity
Restraint of trade
Computer costs including VAT
Machinery costs see note
Notes:
The company received a dividend from a local investment company on
December
The cost price of the opening stock was R and the market value was R as on March The cost
price of the closing stock was R and the market value was R on February
The list of doubtful debts as at February amounted to R and of the total amount have been in
arrears for more than days. The balance of the debtors have not been in arrears for more than days. The
doubtfuldebt allowance by the Commissioner for the year of assessment, amounted to R
Salaries paid during the current year of assessment amounted to R and the company also contributed
R towards the provident fund on behalf of the companys employees.
Legal expenses were incurred as follows:
Drafting of lease contracts for the company amounting to R
The balance of the expenses relate to collection of outstanding trade debtors.
Majuba Pty Ltd incurred an expense of R in acquiring a design on its trading merchandise.
The company paid the entire amount of electricity for the period February to August
The full payment was made to the former operations manager on January for agreeing not to start a business
in South Africa within a period of four years.
Due to the expansion of the business, the company purchased four computers during October for immediate use
by the finance department. The taxpayer elects the :: writeoff that pertains to other assets in terms of section
E
On February Majuba Pty Ltd acquired a new manufacturing machine from the United States which was
brought into use on May The cost of the machine was US$ The company settled the purchase price in
full on June No other costs were incurred on the machine and no forward exchange contract was entered into.
The spot rates are as follows:
February $ R
February $ R
May $ R
June $ R
Required:
Calculate in detail Majuba Pty Ltds tax liability for the year ended February
Show all workings and full explanations where applicable
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