QUESTION 3 20 MARKS

Welwitschia Limited is a diamond polishing company founded in March 2020 by UNAM graduates and operates from its factory in Swakopmund. The following information is provided for the years ended 28 February 2021 and 2022: 2022 (N$) 2021 (N$) Profit/(loss) before tax 420 000 (20 000) Included in profit before tax: Depreciation (Machinery) 89 280 111 600 Dividends received 50 000 - Fines paid 15 000 Carry amounts: of office building - Land (cost) 500 000 500 000 - Machinery ? 446 400 Additional information: 1. During February 2022, rental amounting to N$8 000 was received in respect of March 2022. 2. The machinery was purchased at a cost price N$558 000 on 1 March 2020. NAMRA grants the following tax deductions: - No allowance is granted on land - 1/3 wear and tear on machinery 3. Assume that the residual value, useful life and depreciation method of all assets were reviewed at each financial year-end and that it remained the same. 4. There are no other temporary or permanent differences except for those apparent from the given information. 5. The tax rate remained unchanged at 32% REQUIRED: Marks FACULTY OF COMMERCE, MANAGEMENT AND LAW OLD CURRICULUM MODULES Page 29 of 29 (a) Prepare, in accordance with International Financial Reporting Standards (IFRS), the following notes to the financial statements of Welwitschia Limited for the year ended 28 February 2022: i. Income tax expense (use the % approach for the reconciliation); and (3.5) ii. Deferred tax. (1)