Relevant Tax Rules Corporate Profits Unless otherwise specified, only the following rules for taxation of corporate profits will be relevant, other taxes can be ignored: Accounting rules on recognition and measurement are followed for tax purposes. All expenses other than depreciation, amortisation, entertaining, taxes paid to other public bodies and donations to political parties are tax deductible. Tax depreciation is deductible as follows: o 50% of additions to Property, Plant and Equipment in the accounting period in which they are recorded o 25% per year of the written-down value (i.e. cost minus previous allowances) in subsequent accounting periods except that in which the asset is disposed of, o No tax depreciation is allowed on land. The corporate tax on profits is at a rate of 25%. Value Added Tax Country X has a VAT system which allows entities to redaim input tax paid. In country X the VAT rates are: Zero rated 0% Standard rated 15%

QUESTION 1: [20 MARKS] a) An item of plant and equipment was purchased on 1 April 20x1 for R100,000. At the date of acquisition its expected useful economic life was ten years. Depreciation was provided on a straight line basis, with no residual value. On 1 April 20x3, the asset was revalued to R95,000. On 1 April 20x4, the useful life of the asset was reviewed and the remaining useful economic life was reduced to five years, a total useful life of eight years. Calculate the carrying amount at 31 March 20X5, as required by IAS 16 Property, Plant and Equipment

(4 marks) b) Neville has only two items of inventory on hand at its reporting date. Item 1 - Materials costing R24,000 bought for processing and assembly for a customer under a one off order which is expected to produce a high profit margin. Since buying this material, the cost price has fallen to R20,000 Item 2 - A machine constructed for another customer for a contracted price of R36,000. This has recently been completed at a cost of R33,600. It has now been discovered that, in order to meet certain health and safety regulations, modifications at an extra cost of R8,400 will be required. The customer has agreed to meet half the extra cost. Calculate the total value of these two items of inventory in the statement of financial position

(4 marks) c) At 30 September 20X5, BY had the following balances with comparatives: Statement of financial position extracts As at 30 September 20x5 20x4 RODO R000 Non-current tangible assets Property, plant and equipment 260 180 Equity and reserves Property, plant and equipment revaluation reserve 30 10 The statement of profit or loss for the year ended 30 September 20X5 included: Gain on disposal of an item of equipment R10,000 Depreciation charge for the year R40,000 Notes to the accounts: Equipment disposed of had cost R90,000. The proceeds received on disposal were R15,000 Calculate the property, plant and equipment purchases that BY would show in its statement of cash flow for the year ended 30 September 20X5, as required by IAS 7 Financial Accounting 2 Page 3 of 13 Statement of Cash Flows.

(4 marks) d) DOC purchased property for R320,000 exactly 10 years ago. The land included in the price was valued at R120,000. The property was estimated to have a useful economic life of 20 years. DOC has now had the property revalued (for the first time) by a professional valuer. The total value had increased to R800,000, the land now being valued at R200,000. The useful economic life remained unchanged. Calculate the amount that should be credited to DOC's revaluation reserve.

(4 marks) e) JT is registered with its local tax authority and can redaim value added tax paid on items purchased During the year JT purchased a large machine from another country. The supplier invoiced JT as follows: R Cost of basic machine 100,000 Special modifications made to basic design 15,000 Supplier's engineer's time installing and initial testing of machine 2,000 Three years' maintenance and servicing 21,000 138,000 Value added tax @ 20% 27,600 Total 165,600 Prior to delivery, JT spent R12,000 preparing a heavy duty concrete base for the machine. Calculate the amount that JT should debit to non-current assets for the cost of the machine. (4 marks)