ness corporation as defined in the Income Tax Act PM is a registered VAT vendor and all amounts are 40 ASSIGNMENT 2: SEMESTER 2 QUESTION 1 (40 marks, 72 minutes) This question comprises of two unrelated parts. PART A (38 marks, 68 minutes) Punch Master (Pty) Ltd (PM) is a South African company that manufactures mining equipment. The best pany has been approved as a manufacturer by SARS for Income tax purposes. PM is not a small buste exclusive of VAT, unless specifically stated otherwise. The company's year of assessment ended on 31 March 2020 You are presented with the following information by the financial director for the tax year ended on 31 March 2020 with the request to calculate the normal income tax liability of PM for the 2020 year of assessment: 1. The calculated taxable income for the 2020 year of assessment is R2 783 276 before the tax impli- cations of the items listed in 2 to 12 below have been taken into account 2. Trading stock comprised the following: 3. 4. Opening stock - 01/04/2019 Closing stock - 31/03/2020 Cost price R587 395 Cost price R689 261 Market value R572 451 Market value R693 215 Opening and closing stock were accounted for at the cost price thereof in the calculated taxable income for 2020 in note 1 above. PM contributed R355 000 towards the pension fund for all employees. PM has made a restraint of trade payment of R900 000 on 15 November 2019 to Mr. DJ Spanner, one of the mechanical engineers who has resigned on 30 October 2019 to start his own engineering consulting business. The restraint agreement between HP and Mr. DJ Spanner is effective from 1 December 2019 for five years. The full amount was taxable in the hands of Mr. DJ Spanner. The outstanding debtors balance as at 31 March 2020 was R250 000 after all write-offs were made. The financial manager drew up a list of doubtful debts as at 31 March 2020, which amounted to R127 000. PM Ltd does not use IFRS 9 accounting standards for financial reporting purposes and the debtors that have been in arrears as at 31 March 2020 are as follows: 5. 6. 60 days 90 days 120 days R25 000 R52 000 R63 000 During the 2019 year of assessment, SARS granted a doubtful debt allowance of R75 000 to PM. PM acquired a patent for manufacturing new hydraulic drills on 15 September 2019 at a total cost of R85 500 (including VAT). The patent was duly registered on 1 October 2019. PM donated R150 000 to a registered public benefit organization on 1 December 2019. The neces- sary section 18A income tax certificate was received on 15 January 2020. The full amount donated, was deducted in the calculation of the taxable income in note 1 above. 7 ness corporation as defined in the Income Tax Act PM is a registered VAT vendor and all amounts are 40 ASSIGNMENT 2: SEMESTER 2 QUESTION 1 (40 marks, 72 minutes) This question comprises of two unrelated parts. PART A (38 marks, 68 minutes) Punch Master (Pty) Ltd (PM) is a South African company that manufactures mining equipment. The best pany has been approved as a manufacturer by SARS for Income tax purposes. PM is not a small buste exclusive of VAT, unless specifically stated otherwise. The company's year of assessment ended on 31 March 2020 You are presented with the following information by the financial director for the tax year ended on 31 March 2020 with the request to calculate the normal income tax liability of PM for the 2020 year of assessment: 1. The calculated taxable income for the 2020 year of assessment is R2 783 276 before the tax impli- cations of the items listed in 2 to 12 below have been taken into account 2. Trading stock comprised the following: 3. 4. Opening stock - 01/04/2019 Closing stock - 31/03/2020 Cost price R587 395 Cost price R689 261 Market value R572 451 Market value R693 215 Opening and closing stock were accounted for at the cost price thereof in the calculated taxable income for 2020 in note 1 above. PM contributed R355 000 towards the pension fund for all employees. PM has made a restraint of trade payment of R900 000 on 15 November 2019 to Mr. DJ Spanner, one of the mechanical engineers who has resigned on 30 October 2019 to start his own engineering consulting business. The restraint agreement between HP and Mr. DJ Spanner is effective from 1 December 2019 for five years. The full amount was taxable in the hands of Mr. DJ Spanner. The outstanding debtors balance as at 31 March 2020 was R250 000 after all write-offs were made. The financial manager drew up a list of doubtful debts as at 31 March 2020, which amounted to R127 000. PM Ltd does not use IFRS 9 accounting standards for financial reporting purposes and the debtors that have been in arrears as at 31 March 2020 are as follows: 5. 6. 60 days 90 days 120 days R25 000 R52 000 R63 000 During the 2019 year of assessment, SARS granted a doubtful debt allowance of R75 000 to PM. PM acquired a patent for manufacturing new hydraulic drills on 15 September 2019 at a total cost of R85 500 (including VAT). The patent was duly registered on 1 October 2019. PM donated R150 000 to a registered public benefit organization on 1 December 2019. The neces- sary section 18A income tax certificate was received on 15 January 2020. The full amount donated, was deducted in the calculation of the taxable income in note 1 above. 7