Question 1 (20)

Sam Sandy, a resident of the Republic, sells and repairs watches from a shop she leases in a local shopping centre. She is a sole proprietor and is registered for value-added tax on the invoice basis. An analysis of the receipts and accruals and expenditure for her two-month tax period ending 30 September 2020 is set out below. Unless otherwise stated, all amounts are inclusive of value-added tax when applicable. She makes solely taxable supplies.

Receipts and accruals

Sales of watches 80 400

Repairs of watches 30 100

Interest 5 400

Expenditure

Bad debts (note 1) 15 400

Bank charges 970

Depreciation (note 2) 31 540

Insurance premiums (note 3) 2 415

Fuel 1 740

Printing and stationery 1 587

Purchases (note 4) 130 100

Salaries 54 740

Rentals (note 5) 15 870

Notes

1. Bad debts of R13 225 written off by Sam Sandy, comprising the following:

R 8 700 owing by one of her long-standing customers, from a credit sale. This customer

has since emigrated and she has been unable to trace her.

R 6 700 was lent by her to an employee, who left town without repaying the loan.

2. Depreciation (for the two-month tax period) is charged for the following assets owned by

Sam Sandy:

Manufacturing equipment that was purchased by her in a previous tax

period for R276 000 (R240 000 plus value-added tax of R36 000)

R120 400

A computer that was purchased by her on 1 August 2020 for R14 375 (R12

500 plus value-added tax of R1 875)

R9 700

3. Sam Sandys insurance premiums of R2 415 were incurred for the following assets that

belong to her:

Manufacturing equipment 460

Office computer 230

Trading stock 1 725

4. Sam Sandys purchases of R160 245 are made up as follows:

Purchases of raw materials from vendors 126 500

Second-hand watches purchased from vendors 17 250

Second-hand watches purchased (and paid for) from non-vendors 16 675

5. Sam Sandys rentals of R15 870 are for the following items:

Shop premises 11 400

Cash register 4 470

YOU ARE REQUIRED TO determine the value-added tax due to, or from, SARS for Sam Sandys two month

tax period that ended on 30 September 2020.

It is imperative that you use the updated VAT rates for the period under review.

Where applicable round off amount to the nearest Rand.