Transaction

ProProperty Ltd entered into an agreement on 1 January 2020 with a customer for the sale of a truck mounted crane including a twoyear service plan for a total of R6 000 000. The truck was delivered on 1 June 2020 on which date the customer paid in full. The customer may also acquire the truck mounted crane from ProProperty Ltd without a service plan for a standalone price of R5 600 000. ProProperty Ltd regularly sells twoyear service plans to customers on a standalone basis for R800 000.

The accountant recorded the full R6 000 000 in revenue that was paid by the customer

Required:

Q.1.1

Record the adjusting journal entries in the books of ProProperty Ltd, for transactions 1 above, to correctly record revenue in terms of IFRS 15 - Revenue from contracts with customers for the year ended 30 June 2020.

All narrations are required.

Round all figures to the nearest Rand.

Q.1.2

ProProperty Ltd had a net profit before tax of R88 800 000. This net profit included the transactions above BEFORE any of the adjustment entries perQ.1.1above. Assume that the cost of sales of the above transactions had already been correctly accounted for in determining the profit before taxation.

In addition, the following transactions were included in calculating the net profit before taxation:

• ProProperty Ltd spent R2 700 000 on research and development. SARS allows 150% deduction on research and development.
• ProProperty Ltd incurred a late payment penalty from the SARS (government tax) of R680 000.
• ProProperty Ltd received dividends from investments to the value of R5 600 000.
• Depreciation for the year amounted to R7 300 000. The wear and tear allowance for the year amounted to R8 700 000.
• During the year ProProperty Ltd sold equipment for proceeds of R5 600 000. The equipment had a cost of R6 000 000 and a carrying amount of R4 000 000 and a tax base of R4 800 000.
• ProProperty Ltd had an assessed loss of R4 800 000 carried forward from 2019.
• The tax rate for all years under review was 28%.

The accountant recorded a current taxation expense of R24 864 000.

Round all figures to the nearest Rand or percentage.

Required:

Q.1.2.1

Calculate the current taxation payable, of ProProperty Ltd for the year ended 30 June 2020, using all the information provided above and in accordance with IAS 12 - Income taxes. Show all workings as marks will be allocated. (17)

Q.1.2.2

Record the adjusting journal entry required for the current taxation payable perQ.1.2.1above.

(3)