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ARC (Pty) Limited is a resident of the Republic. You have been provided with the following notes to the Statement of Comprehensive Income and Profit or Loss for the year ending 31 December 2021.

ARC (Pty) Limited Statement of Comprehensive Income, Profit and Loss for the year ending 31 December 2021

Notes

R

R

Income

Sales

6 200 000

Cost of Sales

3 000 000

Gross profit

3 200 000

Dividends Received

1

30 000

Profit on sale of asset

2

50 000

Total Income

3 280 000

Depreciation

3

12 000

Other operating costs

1 450 000

Total expenses

1 462 000

Net profit before tax

1 818 000

Notes:

Dividends received

All dividends received were from South African companies.

Profit on sale of assets

Machine X was purchased on the 1 ^st of April 2020 for R240 000 and bought into use on the same day. This machine was sold on 30 June 2021 for R260 000. This machine was not used in the process of manufacture. The company writes off depreciation at 10% per annum on the straight-line method for machines. The tax authorities allow a write-off period of 6 years on all machinery if section 11(e) is applicable. (Ignore all VAT implications). YOU ARE REQUIRED TO choose the correct answer: Assuming the company does not qualify as a Small Business Corporation for tax purposes, the taxable capital gain to be included in taxable income for the 2021 year of assessment will amount to:

R16 000

R5 600

R4 480

R20 000

ARC (Pty) Limited is a resident of the Republic. You have been provided with the following notes to the Statement of Comprehensive Income and Profit or Loss for the year ending 31 December 2021. ARC (Pty) Limited Statement of Comprehensive Income, Profit and Loss for the year ending 31 December 2021 Notes R R Income Sales 6 200 000 Cost of Sales 3 000 000 Gross profit 3 200 000 Dividends Received 1 30 000 Profit on sale of 2 asset 50 000 Total Income 3 280 000 3 12 000 Depreciation Other operating costs Total expenses 1 450 000 1 462 000 Net profit before tax 1 818 000 Notes: 1. Dividends received All dividends received were from South African companies. 2. Profit on sale of assets Machine X was purchased on the 1st of April 2020 for R240 000 and bought into use on the same day. This machine was sold on 30 June 2021 for R260 000. This machine was not used in the process of manufacture. The company writes off depreciation at 10% per annum on the straight-line method for machines. The tax authorities allow a write-off period of 6 years on all machinery if section 11(e) is applicable. (Ignore all VAT implications). YOU ARE REQUIRED TO choose the correct answer Assuming the company does not qualify as a Small Business Corporation for tax purposes, the taxable capital gain to be included in taxable income for the 2021 year of assessment will amount to: O R16 000 O R5 600 OR4 480 OR20 000