OCTOBER –
NOVEMBER
2020
, SOLUTION 1: COMPANY TAX & CAPITAL GAINS
TAX
Calculation of the Normal Tax Liability of Baby Bob (Pty) Ltd for the 2020 year of
assessment
R R
Sales 4 365 780
Opening Inventory: Completed products (use the lower cost) (587 000)
: Raw materials (use the lower cost) (46 055)
: Packing material (use the lower cost) (26 800)
Closing inventory: Competed products (use the lower market value) 440 000
: Raw materials (use the lower cost) 56 899
: Packing material (use the lower cost) 43 888
Purchases (780 900)
Salaries (680 800)
Contributions to pension fund (26 000 ∗ 12) (312 000)
Annuity – deductible as he retired on grounds of old age (50 000 ∗ 2) (100 000)
Doubtful debt allowance – 2019 29 000
Doubtful debt allowance – 2020 (322 680 ∗ 25%) (80 670)
Research costs – trials (267 000 ∗ 150%) (400 500)
Research costs – administration (58 000)
Electricity – R96 000
8 64 000
Prepaid portion, (96 000 ∗ )
12
Packaging machine rental – R345 000
7
Prepaid portion (345 000 ∗ 9) 268 333
Total amount not subject to other exceptions 323 333
Total prepayment – R323 333 > R100 000, therefore no s23H deduction, the
deductions will only be limited to current year expenditure
4
Electricity (96 000 ∗ 12) (32 000)
2
Packaging machine rental (345 000 ∗ 9) (76 667)
Accelerated tax allowances: Manufacturing machine (715 000 ∗ 40%) (286 000)
Delivery vehicle
100 256 000
Cost (294 400 ∗ 115)
256 000 10
Wear & Tear: 2019 ( ∗ ) (53 333)
4 12
256 000 8
Wear & Tear: 2020 ( ∗ ) (42 667) (42 667)
4 12
Tax Value 160 000
Capital loss (does not utilize s11(o)) (160 000 − 120 000) 40 000
34 000 8 (3 778)
Furniture: Wear & Tear ( 6 ∗ 12)
NOVEMBER
2020
, SOLUTION 1: COMPANY TAX & CAPITAL GAINS
TAX
Calculation of the Normal Tax Liability of Baby Bob (Pty) Ltd for the 2020 year of
assessment
R R
Sales 4 365 780
Opening Inventory: Completed products (use the lower cost) (587 000)
: Raw materials (use the lower cost) (46 055)
: Packing material (use the lower cost) (26 800)
Closing inventory: Competed products (use the lower market value) 440 000
: Raw materials (use the lower cost) 56 899
: Packing material (use the lower cost) 43 888
Purchases (780 900)
Salaries (680 800)
Contributions to pension fund (26 000 ∗ 12) (312 000)
Annuity – deductible as he retired on grounds of old age (50 000 ∗ 2) (100 000)
Doubtful debt allowance – 2019 29 000
Doubtful debt allowance – 2020 (322 680 ∗ 25%) (80 670)
Research costs – trials (267 000 ∗ 150%) (400 500)
Research costs – administration (58 000)
Electricity – R96 000
8 64 000
Prepaid portion, (96 000 ∗ )
12
Packaging machine rental – R345 000
7
Prepaid portion (345 000 ∗ 9) 268 333
Total amount not subject to other exceptions 323 333
Total prepayment – R323 333 > R100 000, therefore no s23H deduction, the
deductions will only be limited to current year expenditure
4
Electricity (96 000 ∗ 12) (32 000)
2
Packaging machine rental (345 000 ∗ 9) (76 667)
Accelerated tax allowances: Manufacturing machine (715 000 ∗ 40%) (286 000)
Delivery vehicle
100 256 000
Cost (294 400 ∗ 115)
256 000 10
Wear & Tear: 2019 ( ∗ ) (53 333)
4 12
256 000 8
Wear & Tear: 2020 ( ∗ ) (42 667) (42 667)
4 12
Tax Value 160 000
Capital loss (does not utilize s11(o)) (160 000 − 120 000) 40 000
34 000 8 (3 778)
Furniture: Wear & Tear ( 6 ∗ 12)
