Manitoba $($Pty$)$ Ltd manufactures and sells Manita Herbal Teabags as a healthy product. The company

is based in South Coast, KwaZulu$-$Natal, has a $31$ December financial year end and applies International

Financial Reporting Standards.

The draft results of operations for the year ended $31$ December $2022$ is shown below:

R

Sales $2400000$

Rent income $150000$

Dividend income $600000$

Profit on sale of vehicle $300000$

Cost of sales $(900000)$

Depreciation $(450000)$

Interest on expense $(360000)$

Other expenses $(240000)$

Dividends declared $(30$ June $2021)(660000)$

Profit for the period $840000$

Retained earnings: $(1$ January $2021)180000$

Retained earnings: $31$ December $20211020000$

Additional information:

$$ The deferred tax balance at the beginning of the year was R$126000($debit$),$ whereas the deferred

tax balance at the end of the year is R$68400($debit$).$

$$ Other expenses are allocated to the entity$$s core functions as follows:

$$ Administration: $20\%$

$$ Distribution: $30\%$

$$ Other: $50\%$

$$ All amounts are considered material

$$ The normal tax rate is $30\%$ and

$$ The inclusion rate for purposes of capital gains is $50\%.$

The following balances have been extracted from the $2021$ closing balances appeared in the trial balance

at $31$ December $2022$:

$$ Expenses prepaid $(31/12/2021)$ R$45000$

$$ Rent income received in advance $(31/12/2021)$ R$30000$

$$ Rent income received in advance at $31$ December $2022$ R$24000$

$$ Income received in advance is taxed in the year of receipt.

$$ Expenses prepaid at $31$ December $2022$ totalled R$21000.$ Expenses prepaid are deductible for

tax purposes in the year in which they are paid.

Other than the processing of provisional tax payments made during $2022$ which totalled R$540000,$ no

other journal entries have yet been processed regarding tax expense.

$$ The tax assessment for the year $2021$ was received during August $2022.$ It reflected an amount

of R$144000$ for the assessed normal tax on taxable profit for $2021.$

$$ The total tax expense in the statement of comprehensive income in $2021$ was disclosed as

R$294000,$ which was made up of current normal tax of R$156000$ and deferred normal tax of

R$138000.$ No journal entries have yet been processed to take into account any adjustments

that may be necessary.

$$ A vehicle with a carrying amount of R$2100000$ and tax base of R$1950000$ was sold during

$2022.$ Its original cost was R$2250000.$ The base cost of this asset is R$2280000.$

$$ Wear and tear of R$810000$ was granted as a deduction in $2022$ by the tax authorities.

$$ There are no other differences between accounting profit and taxable profit other than those

evident from the information given.

$$ There are no components of other comprehensive income.

REQUIRED:

QUESTION $1[30$ MARKS$]$

In accordance with IAS $12$ Income tax:

a$.$ Prepare all the journal entries relating to the manufacturing of Manitoba $($Pty$)$ Ltd for the year

ended $31$ December $2022.(14)$

NB: $($Show calculations$).$

b$.$ Prepare the Statement of Profit or Loss and Other Comprehensive Income of Manitoba $($Pty$)$ Ltd

for the year ended $31$ December $2022(8)$

c$.$ Prepare the tax expense note to be included in the annual financial statement of Manotoba $($Pty$)$

Ltd for the year ended $31$ December $2022,$ in accordance with, International Financial Reporting

Standards and Companies Act of $2008.(8)$