The following information relates to Covid Ltd, a manufacturing company, which was incorpo

On 1 July 2018 property and plant were acquired at the following amounts (it may be assumed that these assets were immediately brought into use):

$ 000

Land 4 000

Factory buildings 8 000

Office Buildings 2 000

Plant 6 000

Property and plant is measured in terms of the cost model of IAS 16 Property, Plant and Equipment. Covid Ltd provides for depreciation on the straight-line basis. Depreciation has already been provided for on property and plant and is included in the accounting profit before tax.

The depreciation rates are as follows:

Factory and office buildings at 2,5% and 5% per annum respectively, apportioned for a part of a year.

Plant at 20% per annum, apportioned for part of a year.

The Zimbabwe Revenue Authority (ZIMRA) allows the following capital asset allowances

25% Special Initial Allowance and 25% Accelerated Wear and Tear per annum on factory buildings, office building (not apportioned for part of a year).

25% Special Initial Allowance and 25% Accelerated Wear and Tear per annum on the plant (not apportioned for part of a year).

8% debentures

8% interest-bearing debentures of Life Ltd were acquired on 1 January 2018 at its fair value in an active market for $410 000, which was equal to its face value at that date. These debentures are compulsory redeemable at $434 537 on 31 December 2022.

These debentures were acquired by Covid with a business model to collect contractual cash flows as well as to sell these debentures (both purposes equally prominent). The contractual cash flows of these debentures are solely interest and principal payments.

Covid received Revenue of $2,000,000 from a company in Harare which was for the materials to be supplied in January 2020

Prepaid insurance

Insurance of $10,000 and $18,000 for the year ended 31 December 2018 and 2019 respectively

The profit before tax for the year ended 31 December 2019 was $6,200,000 which included the following items

Dividend received $22,000

Fines paid to the ministry of Health $62,000

Donations of $77,000 to a Member of Parliament so that the company gets tenders.

Required:

Prepare income tax expense note for Covid for the year ended 31 December 2019.

(25 marks)

The following information relates to Covid Ltd, a manufacturing company, which was incorpo

On 1 July 2018 property and plant were acquired at the following amounts (it may be assumed that these assets were immediately brought into use):

$ 000

Land 4 000

Factory buildings 8 000

Office Buildings 2 000

Plant 6 000

Property and plant is measured in terms of the cost model of IAS 16 Property, Plant and Equipment. Covid Ltd provides for depreciation on the straight-line basis. Depreciation has already been provided for on property and plant and is included in the accounting profit before tax.

The depreciation rates are as follows:

Factory and office buildings at 2,5% and 5% per annum respectively, apportioned for a part of a year.

Plant at 20% per annum, apportioned for part of a year.

The Zimbabwe Revenue Authority (ZIMRA) allows the following capital asset allowances

25% Special Initial Allowance and 25% Accelerated Wear and Tear per annum on factory buildings, office building (not apportioned for part of a year).

25% Special Initial Allowance and 25% Accelerated Wear and Tear per annum on the plant (not apportioned for part of a year).

8% debentures

8% interest-bearing debentures of Life Ltd were acquired on 1 January 2018 at its fair value in an active market for $410 000, which was equal to its face value at that date. These debentures are compulsory redeemable at $434 537 on 31 December 2022.

These debentures were acquired by Covid with a business model to collect contractual cash flows as well as to sell these debentures (both purposes equally prominent). The contractual cash flows of these debentures are solely interest and principal payments.

Covid received Revenue of $2,000,000 from a company in Harare which was for the materials to be supplied in January 2020

Prepaid insurance

Insurance of $10,000 and $18,000 for the year ended 31 December 2018 and 2019 respectively

The profit before tax for the year ended 31 December 2019 was $6,200,000 which included the following items

Dividend received $22,000

Fines paid to the ministry of Health $62,000

Donations of $77,000 to a Member of Parliament so that the company gets tenders.

Required:

Prepare income tax expense note for Covid for the year ended 31 December 2019.

(25 marks)