QUESTION 3 (30 marks)

Fresh Foods Pty (Ltd) (Fresh Foods) is a privately owned and operated foodservice distributor in Namibia. Fresh Foods operates from its head office in Windhoek with distribution channels across the country. The year of assessment ends on 31 December each year.

1. Total sales for the year amounts to N$15,200,000 and stock purchases amounts to N$7,300,000. The opening stock amounted to N$800,000 and the closing stock amounted to N$1,500,000.

2. Fresh Foods received N$120,000 dividends from its share investments in a local company.

3. Fresh Foods raised a provision for bad debts of N$150,000 for the 2018 year of assessment. The provision for bad debt in 2017 year of assessment amounted to N$80,000. The actual bad debt for the current year amounted to N$65,000.

4. Fresh Foods concluded a foreign loan with Bank of America in order to finance its expanding operations. The initial loan value was US$450,000 obtained on 01 July 2017. The loan lump sum was repaid on 31 August 2018 in accordance with the repayment terms. The applicable exchange rates are:

1July2017 :US$1=N$13.08

31August2018 :US$1=N$14.70

31 December 2018 : US$ 1 = N$ 14.43

5. Due to the increasing demand for its products in Angola, Fresh Foods entered into a lease contract for a property located in Oshikango. The lease agreement was concluded on 1 January 2018 after Fresh Foods paid a lease premium of N$200,000. The total lease term is 10 years with a monthly rent payment of N$20,000.

6. The lease contract further requires Fresh Foods to effect improvements worth N$228,000 on the leased property. The improvements were completed on 31 June 2018 at a cost of N$250,000.

7. In addition, Fresh Foods had the following asset transactions as part of its business operations:

Head office building acquired on 1 January 2010 at a cost of N$4,500,000

Delivery Truck no. 1 was acquired on 1 January 2010 at a cost of N$ 350,000.

Delivery Truck no. 2 was acquired on 31 August 2017 at a cost of N$ 450,000.

Delivery Truck no. 3 was acquired on 01 July 2018 at a cost of N$ 540,000.

8. Other operating expenditure incurred in the production of income amounted to N$2,300,000.

9. The assessed loss for the 2017 year of assessment amounted to N$720,000

Required:

Calculate the taxable income and tax liability for Fresh Foods (Pty) Ltd for the 2018 year of assessment.