QUESTION $3(28$ marks$)$

You are the Audit Manager on the audit of Coles Ltd$.$ You are busy with the audit for

the financial year ended $31$ March $2024.$

Share Investment

On $5$ July $2023,$ Coles Ltd purchased $5000$ ordinary shares in Axle Ltd on the stock

exchange, and the shares were purchased for trading purposes. Coles Ltd paid R$209$

per Axle Ltd share and a transaction cost of R$3$ per share. The fair value of the Axle

Ltd shares on the purchase date was equal to the purchase price per share. The Axle

Ltd shares had a fair value of R$251$ per share on $31$ March $2024.$

Debentures Issued

To fund an expansion project that Coles Ltd is planning, the directors approved the

issue of debentures to the public.

Therefore, on $1$ December $2023,$ Coles Ltd issued $1000000$ debentures of R$15$ each.

The debentures are $8\%$ debentures and they are redeemable at R$16$ each on $30$

November $2028.$ Interest is payable annually on $30$ November, and the issue price of

the debentures represents their fair value. Transaction costs of R$228707$ were paid

in cash on the issue date of the debentures.

Deferred Tax

After discussions with the Financial Accountant, you determined that Coles Ltd

recognised a deferred tax asset of R$86240$ for the $2024$ financial year. The Financial

Accountant provided you with the following deferred tax calculation to show how they

arrived at the deferred tax asset recognised: