Question
Nexx Limited is an entity with a 30 April financial year-end. The following information is available for the financial year ending 30 April 2021: The
Nexx Limited is an entity with a 30 April financial year-end. The following information is available for the financial year ending 30 April 2021:
The entity showed a profit before tax of R513 500. The amounts mentioned below are already included in this profit before tax figure.
The entity received dividends from its various investments to the value of R23 550. The entity paid an income tax penalty to the value of R5 500.
The entity sold a property on 1 May 2020, it owned for 10 years and made a profit to the value of R147 300. Assume that the accounting and the capital profit on the sale of the property are equal.
The entity bought a vehicle on 31 July 2020 at the cost of R310 000. At acquisition, the vehicle's useful life is determined as 5 years and the residual value at R70 000. Depreciation is recognised using the straight-line method. Assume The South African Revenue Service grants a wear-and-tear allowance on vehicles over 4 years.
One of the entity's customers made a payment of R100 000 on an order which will only be fulfilled and delivered during the 2022 financial year. The amount was recognised as income received in advance.
Assume an income tax rate of 28% and a capital gains tax inclusion rate of 80%. Assume a deferred tax balance of Rnil on 1 May 2020.
You can assume that the entity expects to make profits during the 2022 financial year.
REQUIRED:
2.1) Calculate Nexx Limited's current tax expense for the financial year ending 30 April 2021. Round all answers to the nearest Rand. (15 marks)
2.2) Calculate Nexx Limited's deferred tax balance and deferred tax movement for the financial year ending 30 April 2021. Round all answers to the nearest Rand. (13 marks)
2.3) Prepare the income tax expense note of Nexx Limited for the financial year ending 30 April 2021. You need to include a tax rate reconciliation in your note and round all percentages to two decimals. Comparative amounts are not required. (12 marks)
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