Question $1[30]$

Blitz $($Pty$)$ Ltd is a South African resident. It is a small business corporation that manufactures braai $($BBQ$)$ accessories and products. The company$$s financial year ends on $28/29$ February. Blitz $($Pty$)$ Ltd is a registered vat vendor and the company does not apply IFRS $9$ for financial reporting purposes.

The following information is available for the year ended $29$ February $2024($all amounts exclude VAT unless otherwise stated$)$:

Income

Notes

R

Sales

$6220000$

Expenses and costs

Salaries and wages

$1$

$900000$

Bad debts

$75000$

Doubtful debts

$2$

$?$

Legal expenses

$3$

$205000$

Purchase of raw material

$2500000$

Inventory

$4$

$?$

Electricity

$5$

$42000$

Machinery costs

$6$

see note $6$

Computer costs

$7$

$66000$

Commercial building

$8$

$4000000$

Restraint of trade

$9$

$120000$

Patent acquired

$10$

$60000$

Notes:

$1.$ The salaries paid during the current year of assessment amounted to R$820000$ and the company also contributed R$80000$ towards the provident fund on behalf of the company$$s employees.

$2.$ The list of doubtful debts as at $29$ February $2024$ amounted to R$150000$ and $70\%$ of the total amount have been in arrears for more than $120$ days. The balance of the debtors have not been in arrears for more than $60$ days. The doubtful$-$debt allowance by the Commissioner for the $2023$ year of assessment, amounted to R$51000.$

$3.$ Legal expenses were incurred as follows:

$-$

Drafting of lease contracts for the company amounting to R$70000.$

$-$

The balance of the expenses relate to collection of outstanding trade debtors.

$4.$ The cost price of the opening stock was R$610000$ and the market value was R$650000$ as on $1$ March $2023.$ The cost price of the closing stock was R$590000$ and the market value was R$615000$ on $29$ February $2024.$

$5.$ The company paid the entire amount of electricity for the period $1$ February $2024$ to $31$ August $2024.$

$6.$ On $1$ February $2023,$ Blitz $($Pty$)$ Ltd acquired a new manufacturing machine from Brazil which was brought into use on $2$ May $2023.$ The cost of the machine was US$$38000.$ The company settled the purchase price in full on $1$ July $2023.$ No other costs were incurred on the machine and no forward exchange contract was entered into.

The spot rates are as follows:

$1$ February $2023$ $$1=$ R$18\mathrm{.}20$

$28$ February $2023$ $$1=$ R$18\mathrm{.}50$

$2$ May $2023$ $$1=$ R$18\mathrm{.}70$

$1$ July $2023$ $$1=$ R$18\mathrm{.}80$

$7.$ Due to the expansion of the business, the company purchased three laptops during November $2023$ for immediate use by the finance department. The taxpayer elects the $50$:$30$:$20$ write$-$off that pertains to other assets in terms of section $12$E$.$

$8.$

The company constructed a mini commercial building on $10$ June $2023.$ The building was completed and immediately brought into use on $1$ January $2024.$

$9.$

The full payment was made to the former operations manager on$2$ January $2024$ for agreeing not to start a business in South Africa within a period of four years.

$10.$

Blitz $($Pty$)$ Ltd incurred an expense of R$60000$ in acquiring a design on its trading merchandise.

Required:

Calculate in detail Blitz $($Pty$)$ Ltd$.$s tax liability for the year ended $29$ February $2024.$

Show all workings and full explanations where applicable