QUESTION ONE

Alexis Bell, a resident of the Republic, sells and repairs cell phones from a shop she

leases in a local shopping centre. She is a sole proprietor and is registered as a vendor on

the invoice basis.

An analysis of Alexis Bells income and expenditure for her two-month tax period ending

on 30 September 2020 is set out below. Unless otherwise stated, all amounts are inclusive

of value-added tax when applicable:

Income

Sales of cell phones 207 000

Repairs to cell phones 29 900

Interest 3 220

Indemnity award (note 1) 5 175

Lay-by receipts towards cell phones still to be purchased 5 750

Expenditure

Bad debts (note 2) 3 910

Bank charges 920

Bus coupons (note 3) 1 035

Depreciation (note 4) 13 966

Insurance premiums (note 5) 4 370

Fuel (petrol and oil) 4 485

Printing and stationery 1 564

Purchases (note 6) 160 425

Salaries 41 400

Rentals (note 7) 13 340

Notes

1. Alexis Bells indemnity award of R5 175 was received from her insurer for two cell

phones that were stolen from her shop in June 2020.

2. Bad debts written off by Alexis Bell of R3 876 comprised the following:

R1 035 owing by a long-standing customer of hers from a credit sale. This customer has

since emigrated, and she has been unable to trace him.

R2 875 was lent to an employee of hers who left her employment without repaying the

loan.

3. Instead of giving an employee cash to cover his transport expense to and from work,

Alexis Bell purchased bus coupons that she distributes to him on a weekly basis. During

this two month period she incurred R1 035 on purchasing bus coupons.

4. Depreciation (for the two-month tax period) is charged for the following assets owned by

Alexis Bell:

Manufacturing equipment and tools that were purchased by Alexis Bell in a previous tax

period for R276 000 (R240 000 plus value-added tax of R36 000) R8 000

A computer that was purchased by Alexis Bell on 1 August 2020 for R14 375 (R12 500

plus value-added tax of R1 875) R695

A motor car that was purchased by Alexis Bell on 1 September 2020 for R316 250 (R275

000 plus value-added tax of R41 250). She has the sole use of this motor car. She

maintains accurate records of her travelling and can prove that her business travelling is

40% of her total travelling.

R5 271

5. Alexis Bells insurance premiums of R4 370 were incurred for the following:

Manufacturing equipment and tools R460

Office computer R230

Motor car R1 955

Trading stock R1725

6. Alexis Bells purchases of R160 425 are made up as follows:

Purchases of new cell phones (all from vendors) R126 500

Second-hand cell phones purchased from vendors R17 250

Second-hand cell phones purchased, and paid for, from non-registered persons

R16 675

Alexis Bell purchases second-hand cell phones from both vendors (for example,

auctioneers) and from non-registered persons (for example, private individuals and

deceased estates). She displays and sells second-hand cell phones in her shop.

7. Alexis Bells rentals of R13 340 are for the following:

Shop premises R10 925

Cash register R1 495

Urn (located in the shop to enable her employees, and herself, to make tea or coffee)

R920

8. In August 2019 Alexis Bell purchased accessories for R19 320 (R16 800 plus valueadded

tax of R2 520) from a local supplier. She deducted input tax of R2 520 in her tax

period 1 August 2019 to 30 September 2019. She then encountered problems with these

accessories and paid the supplier only R14 490 (R12 600 plus value-added tax of R1 890)

on 30 September 2019. She refused to settle this account until the problems were

resolved. Twelve months later, on 30 September 2020, R4 830 (R4 200 plus value-added

tax of R630) was still outstanding despite numerous requests from her for the problems to

be sorted out, and monthly demands having been received by her from her supplier.

9. During August 2020 Alexis Bell helped herself to a cell phone, part of her trading stock

that had cost her R1 564 (R1 360 plus R204 value-added tax) for her personal use. Its

open market value is R2 346.

10. Alexis Bell has her hair styled once a week. She spends from 07h00 to 08h00 every

Friday morning at Salon Goldilocks. Curley Barber, the hairdresser who styles her hair

needed a cell phone but could not afford to buy one. Curley Barber agreed to style her hair

for no charge for the months of August 2020 and September 2020 in return for a free cell

phone. Had she paid for her hair to be styled by Salon Goldilocks during this two-month

period, it would have cost her R1 380 (R1 200 plus value-added tax of R180). She, in turn,

agreed to give Curley Barber a cell phone. On 30 September 2020 she gave Curley

Barber a cell phone that had cost her R920. This cell phone sells for R1 587 (R1 380 plus

value-added tax of R207).

You are required to determine Alexis Bells net value-added tax due to, or from, the

Commissioner, for her two-month tax period ended 30 September 2020. Use a VAT

rate of 15%. Round off to the nearest Rand and show ALL workings. Where there is

a nil VAT effect, state a brief reason why.