Part B (15 marks)

The following information is an extract from the statement of profit or loss and other comprehensive income and notes of Nougat (Pty) Ltd for the financial year ended 31 December 2016.

Profit before tax

Profit before tax includes the following items:

Income

Profit on sale of motor vehicle

Dividends received

Expenses

Provision for warranty costs

Interest and penalties on the late payment of Value-added Tax

? 2 40,000

50,000 4

15,000

20,000

30,000 2 ? 3

Depreciation equipment

Depreciation Depreciation

- plant and

- motor vehicles - machinery

Additional information

N$ 120,000

Notes

1. The following information regarding the property, plant and equipment of Nougat (Pty) Ltd is an extract from the fixed asset register after the recording of all the asset transactions for the year.

Plant and equipment Motor Vehicles Machinery

5 years - 5 years 2 0 years 3

Cost

200,000 120,000 500,000

Carrying Amount

140,000 20,000 ?

Depreciation rate

10 years 4 years 5 years

Tax allowance

Notes

2. Included in the cost above, is a motor vehicle with a cost price of N$40 000 which was sold on 31 December 2016 for N$35 000. The carrying amount and tax base of the motor vehicle at the date of the sale was N$10 000 and N$16 000 respectively. No other property, plant and equipment were bought or sold during the current and prior financial years. Unless otherwise state, assume that all property, plant and equipment were acquired on the first day of the financial year and a residual value of nil applies.

3. On 1 July 2016, the company purchased a customised piece of machinery for N$500 000. There is no tax allowance or deductions granted on this machinery.

4. No provision was made for warranty costs in 2015. The Tax authorities will only allow the warranty costs as a deduction for tax purposes when these costs are actually incurred/paid.

5. The Namibian normal income tax rate was 28% for the 2016 financial year.

Required:

a) Calculate the current tax expense in the statement of profit or loss and other comprehensive income of Nougat (Pty) Ltd for the year ended 31 December 2016. (15 marks)