CAS3701 CASE STUDY 4 - 2023 (845060)

CAS3701 CASE STUDY 4
SEMESTER 2 - 2023
UNIQUE NUMBER: 845060


DUE DATE: 29 SEPTEMBER 2023

, CASE STUDY 4

UNIQUE NUMBER: 845060

CLOSING DATE: 29 SEPTEMBER 2023

MARKS: 20



1. GOODWILL CALCULATION:

Please review the trainee’s calculation above and provide me with comments and
corrections (where necessary). Please do not re-perform the calculation.

Email 2 of 3:

Subject: Re: Solar Limited



Dear Lucas,

I hope this email finds you well. I have reviewed the trainee's calculation of goodwill at the
acquisition of Solar Ltd, and I would like to provide some comments and corrections as
follows:


Issue 1: Deferred Tax Rate Calculation

 Issue: The deferred tax on the revaluation of land and inventory should be calculated
at 27%, not 28%. (The South African National Treasury announced on 23 February
2022 that the corporate tax rate is reduced from 28% to 27% for years of assessment
that end on or after 31 March 2023).

 Explanation: The issue here is that the trainee used a tax rate of 28% for calculating
the deferred tax, while the correct rate should be 27% based on the announcement
by the South African National Treasury.

 Recommendation for Improvement: To address this issue, the correct corporate tax
rate of 27% should be applied when calculating the deferred tax on the revaluation
of land and inventory. This ensures compliance with the updated tax rate and
accurate financial reporting.




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