QUESTION THREE [40] FurnCo (Pty) Ltd ("FurnCo" or "the company") operates as a furniture manufacturer in Durban. The company is a resident in the Republic and is not regarded to be a small business corporation. The Commissioner is satisfied that Furnco carries on a process of manufacture. For the year ended 29 February 2022, a taxable profit of R14 650000 was calculated, before taking into account the following (ignore Value-Added Tax (VAT) for the purpose of this question): 1. Local dividends and local interest During the year, gross local dividends of R15 000 were paid to the FurnCo. In addition, local interest of R27 000 accrued to the company. 2. Trading stock: Opening and closing stock were as follows: - Trading stock as at 1 March 2021R675000 - Trading stock as at 29 February 2022 R940 000 3. Bad debts A trade debtor owing an amount of R30 280 went into liquidation. The liquidators paid FurnCo an amount of R7 570. The remaining amount outstanding is not considered to be recoverable. 4. Doubtful debts The total provision for doubtful debts for the year ended 29 February 2022 is R154 000, while the prior year provision was R142 000. The Commissioner has agreed to a 25% allowance for doubtful debts. 5. Annuities paid During the 2022 year of assessment, the following annuities were paid by FurnCo: - R24 000 to Busi Ndlovu, the widow of a former employee who had been killed in a work-related accident; - R20 000 to Heather Smith, a former employee who resigned to care for her disabled child. 6. Restraint of trade payment 6. Restraint of trade payment The head furniture designer at FurnCo decided to retire early. A payment of R375 000 was made to him on 1 March 2021 to restrain him from working for a competitor company or starting a similar business within the province for four years. 27 REGENT BUSINESS SCHOOL (RBS) - JANUARY 2023 BACHELOR OF COMMERCE YEAR 3 - ACADEMIC AND ASSESSMENT CALENDAR - DISTANCE 7. Legal expenses Legal expenses of R3 000 were incurred in respect of the drawing up of the restraint of trade agreement (see note 6 above). 8. New lease On 1 September 2021, the company entered into a 20-year lease agreement for a factory building large enough to accommodate the expanding production of the company. The lease agreement stipulated that Jozi Shoes pay a premium of R750 000 on 1 September 2021 and monthly rentals of R95 000 on the 1st day of every month, commencing on 1 September 2021. The company moved to the new premises on 1 September 2021. 9. Fines paid The company was fined R5 000 for attempting to bribe a safety officer when he inspected the new factory building for adherence to safety requirements. 10. New machinery purchased The following machinery was purchased (for use in the process of manufacture): - Machine 1 (new and unused) was purchased on 1 October 2021 for R245 000. It cost a further R5 000 to have the machine installed. Due to an unforeseen problem with the installation, the machine was brought into use on 1 November 2021. - Machine 2 (second-hand) was purchased for R52 000 on 1 January 2022 and brought into use immediately. 11. New delivery vehicle purchased A new delivery vehicle was purchased on 1 November 2021 for R525 000 and brought into use immediately. The Commissioner will allow for delivery vehicles to be written off over 4 years on a straight-line basis. 12. Sale of land The company owned land, purchased on 1 January 2020 for R800 000, on which it intended to build a factory. Due to unrest in the area, the directors decided not to commence with the building of the factory and passed a resolution to sell the land. The Legal expenses of R3 000 were incurred in respect of the drawing up of the restraint of trade agreement (see note 6 above). 8. New lease On 1 September 2021, the company entered into a 20 -year lease agreement for a factory building large enough to accommodate the expanding production of the company. The lease agreement stipulated that Jozi Shoes pay a premium of R750 000 on 1 September 2021 and monthly rentals of R95 000 on the 1st day of every month, commencing on 1 September 2021. The company moved to the new premises on 1 September 2021. 9. Fines paid The company was fined R5 000 for attempting to bribe a safety officer when he inspected the new factory building for adherence to safety requirements. 10. New machinery purchased The following machinery was purchased (for use in the process of manufacture): - Machine 1 (new and unused) was purchased on 1 October 2021 for R245 000. It cost a further R5 000 to have the machine installed. Due to an unforeseen problem with the installation, the machine was brought into use on 1 November 2021. - Machine 2 (second-hand) was purchased for R52 000 on 1 January 2022 and brought into use immediately. 11. New delivery vehicle purchased A new delivery vehicle was purchased on 1 November 2021 for R525 000 and brought into use immediately. The Commissioner will allow for delivery vehicles to be written off over 4 years on a straight-line basis. 12. Sale of land The company owned land, purchased on 1 January 2020 for R800 000, on which it intended to build a factory. Due to unrest in the area, the directors decided not to commence with the building of the factory and passed a resolution to sell the land. The land was sold on 1 April 2021 for R805 000. 13. Assessed loss brought forward For the year ended 28 February 2021 FurnCo had an assessed loss of R1 234000. Required Calculate the normal tax liability of FurnCo (Pty) Ltd for the 2022 year of assessment. Round off your calculations to the nearest Rand