QUESTION 2 [20 MARKS] Thomas Shilongo, a resident of Namibia, started a printing business in Windhoek. He signed a 10 year lease agreement for a premises in Prosperita on 1st July 2020. A monthly rental of N$9,000 is payable from the commencement of the lease. In addition, he is obliged to improve the buildings at a cost of N$500,000. A lease premium of N$40,000 was also payable on 14 July 2020. The improvements were completed on 19 January 2021 at a cost of N$525.000 He also purchased a printer at a cash price of N$200.000. Delivery and transport charges were N$5,000 and installation costs amounted to N54,900. The installation costs were incurred when an electrical power point had to be relocated to provide power to the printer at a cost of N$900 and when the floor had to be reinforced to hold the weight of the printer at a cost of N$4,000. The income statement for the year of assessment 2021 revealed a net profit of N$ 790,000 after the following was taken into account: Receipts and Accruals: Local dividends were received from Old Mutual Namibia, N$9.000 Interest from a loan granted to Thomas's brother, N$11,000 Expenses: Wages totalling N$112.000 were paid to employees. This amount consists of: Permanent staff N$80,000 Casual workers N$23,000 Pension fund contribution for permanent staff N$9,000 Hi Administrative expenses: Permanent staff Municipality Telephone expenses N$112.000 N$14,400 N$24,000 6 Included in the telephone amount is the purchase of a switchboard system valued at N$10,000 . Annuities paid to employees: Amos was killed during the construction of the building. Due to the poor financial status of his widow, the business decided to pay her an annuity of N$2,000 per month for the next 2 years. For the period under review she was paid N$6,000 which was due to her. Sam was injured in the same accident. Due to the severity of his injuries, he will not be able to take up employment. An annuity of N$5,000 per month is payable to him. For the period under review he was paid N$15,000 which was due to him iv. Depreciation: Item Purchase Cost Price(NS) Depreciation(NS) date Nissan Bakkie 1/7/2020 125,000 16,667 Printing Equipment 1/7/2020 200,000 3,333 Office Furniture 1/1/2021 60,000 2.000 V. Bad Debts: A loan was granted to Amos to enable him to do repairs on his private vehicle. Thomas Sparrow decided not to recover the sum from his widow. The amount of the loan was N$5,000 and interest was charged at a rate of 10%. Interest of N$125 was accounted for vi. Other deductible expenses, N$192,000 Required: Calculate the taxable income of Thomas Shilongo for the 2021 year of assessment (28 February 2021). Commence your answer with the net profit of N$790,000 and show all your workings. Marks are allocated for the reasons where applicable. Round all amounts of to the nearest NS. 7
