TAX3701/201/1/2020
Tutorial letter 201/1/2020
THE TAXATION OF BUSINESS ACTIVITIES
TAX3701
Semester 1
Department of Taxation
SUGGESTED SOLUTION
ASSIGNMENT 3
Bar code
, 2
Dear Student
This tutorial letter contains the questions and solution to assignment 3. Good luck with your
preparation for the examination.
Kind regards
TAX3701 LECTURERS
Telephonic contact with lecturers:
The lecturers available to assist you are:
Mrs SC Cass 012 429 8992
Mr Mhlanguli Nare 012 429 4002
Ms MSI Wentzel 012 429 4876
Departmental cell phone number: 079 365 1124
E-mail contact with lecturers: (Semester 1)
(Semester 2)
, 3 TAX3701/201
QUESTION 1 (20 marks, 36 minutes)
PART A (15 marks, 27 minutes)
Delicious Bakery (Pty) Ltd (Delicious Bakery) sells its freshly baked products to supermarkets all
over South Africa. Delicious Bakery is a registered vendor for Value-Added Tax (VAT) purposes.
The company specialises in the baking of brown and white bread as well as scones.
The accountant of Delicious Bakery has compiled the following income and expenditure statement
for the two month tax period ending 29 February 2020. All amounts exclude VAT unless speci-
fically stated otherwise:
Income Notes R
Bread sales 1 3 450 220
Scones sales 1 2 155 000
Rent received from guesthouse 2 28 800
Expenditure
Credit note issued 3 150
Delivery vehicle purchased 4 467 800
Fuel 98 500
Salaries 1 980 900
Electricity 5 6 455
Oven purchased 6 34 500
Notes:
1. All of the sales have been invoiced to customers. White bread sales was R2 242 643 and
brown bread was R1 207 577.
2. Delicious Bakery owns a guesthouse situated above the bakery. For the two month VAT
period there was only one guest that stayed for a total of 36 days on a business trip. Delicious
Bakery charged the guest a flat rate of R800 per day. Five percent of Delicious Bakery’s
entire business relates to the guesthouse.
3. Delicious Bakery issued a credit note for R150 (including VAT) on 26 February 2020. This
was due to an incorrect pricing on an invoice issued to a client on 31 December 2019.
4. A second-hand delivery vehicle was purchased from a non-vendor for R467 800 on
20 January 2020. The market value (excluding VAT) on the date of purchase was
R480 000. Delicious Bakery paid R300 000 on 29 February 2020 and the balance was paid on
31 March 2020. From 1 February 2020, the use of the delivery vehicle was given to the
employee responsible for making the deliveries for the bakery. The employee bears all the
cost of maintaining the vehicle.
5. The electricity paid was for both the bakery and the guesthouse.
6. A new oven was purchased and delivered on 1 February 2020 in terms of an instalment credit
agreement. The purchase price was R34 500 (including VAT). The first instalment of
R3 500 was paid on 29 February 2020 and includes interest amounting to R350.
Tutorial letter 201/1/2020
THE TAXATION OF BUSINESS ACTIVITIES
TAX3701
Semester 1
Department of Taxation
SUGGESTED SOLUTION
ASSIGNMENT 3
Bar code
, 2
Dear Student
This tutorial letter contains the questions and solution to assignment 3. Good luck with your
preparation for the examination.
Kind regards
TAX3701 LECTURERS
Telephonic contact with lecturers:
The lecturers available to assist you are:
Mrs SC Cass 012 429 8992
Mr Mhlanguli Nare 012 429 4002
Ms MSI Wentzel 012 429 4876
Departmental cell phone number: 079 365 1124
E-mail contact with lecturers: (Semester 1)
(Semester 2)
, 3 TAX3701/201
QUESTION 1 (20 marks, 36 minutes)
PART A (15 marks, 27 minutes)
Delicious Bakery (Pty) Ltd (Delicious Bakery) sells its freshly baked products to supermarkets all
over South Africa. Delicious Bakery is a registered vendor for Value-Added Tax (VAT) purposes.
The company specialises in the baking of brown and white bread as well as scones.
The accountant of Delicious Bakery has compiled the following income and expenditure statement
for the two month tax period ending 29 February 2020. All amounts exclude VAT unless speci-
fically stated otherwise:
Income Notes R
Bread sales 1 3 450 220
Scones sales 1 2 155 000
Rent received from guesthouse 2 28 800
Expenditure
Credit note issued 3 150
Delivery vehicle purchased 4 467 800
Fuel 98 500
Salaries 1 980 900
Electricity 5 6 455
Oven purchased 6 34 500
Notes:
1. All of the sales have been invoiced to customers. White bread sales was R2 242 643 and
brown bread was R1 207 577.
2. Delicious Bakery owns a guesthouse situated above the bakery. For the two month VAT
period there was only one guest that stayed for a total of 36 days on a business trip. Delicious
Bakery charged the guest a flat rate of R800 per day. Five percent of Delicious Bakery’s
entire business relates to the guesthouse.
3. Delicious Bakery issued a credit note for R150 (including VAT) on 26 February 2020. This
was due to an incorrect pricing on an invoice issued to a client on 31 December 2019.
4. A second-hand delivery vehicle was purchased from a non-vendor for R467 800 on
20 January 2020. The market value (excluding VAT) on the date of purchase was
R480 000. Delicious Bakery paid R300 000 on 29 February 2020 and the balance was paid on
31 March 2020. From 1 February 2020, the use of the delivery vehicle was given to the
employee responsible for making the deliveries for the bakery. The employee bears all the
cost of maintaining the vehicle.
5. The electricity paid was for both the bakery and the guesthouse.
6. A new oven was purchased and delivered on 1 February 2020 in terms of an instalment credit
agreement. The purchase price was R34 500 (including VAT). The first instalment of
R3 500 was paid on 29 February 2020 and includes interest amounting to R350.
