+254792947610
TAX3701
Assignment 2
Semester 1
2024
(798141) -
DUE 19 April
2024
QUESTIONS WITH WELL OUTLINED ANSWERS
[Date]
,TAX3701 Assignment 2 Semester 1 2024 (798141) - DUE 19
April 2024
QUESTION 1 (40 marks, 72 minutes)
Crystal (Pty) Ltd (“Crystal”) is a South African resident company with a 31 March
financial year end. The company is a leading manufacturer and distributor of float
glass, laminated glass, and various mirror products to customers in and outside South
Africa. Crystal is registered as a category A vendor for Value-Added Tax (VAT)
purposes and is not a Small Business Corporation as defined in section 12E of the
Income Tax Act no.58 of 1962. The South Africa Revenue Service (SARS) recognises
Crystal’s manufacturing processes as approved processes of manufacture. All amounts
exclude VAT unless stated otherwise. The following income and expenditure
statement was prepared by Crystal’s accountant for the financial year ended 31 March
2024: Notes Amount (R) Income Revenue 1 3 450 000 Cost of sales 2 (887 500)
Investment income 3 312 300 Expenditure Depreciation expense 4 (427 640) Payment
to Mrs Van Louw 5 (240 000) Net profit before tax 2 207 160 Notes:
1. Revenue from sales made to customers situated outside South Africa amounted to
R1 034 000. This amount is not yet accounted for in the above income and
expenditure statement.
2. The cost of sales amount was determined as follows: R Opening
stock…………………………………….. 404 000
Purchases…………………………………………. 725 000 Closing
stock……………………………………… (241 500) Cost of
sales………………………………………. 887 500 The accountant was uncertain on
how to account for the closing stock. On 31 March 2024, it was found that some of
the closing stock items were damaged to an extent that it would be unethical for
Crystal to distribute them at discounted selling prices. These closing stock items are
included in the above closing stock figure at a total cost of R41 800.
3. During the 2023 financial year, Crystal embarked on a quest to diversify its
investments. Below is a summary of the returns earned on the company’s individual
investments for the 2024 financial year:
For exam pack with questions and answers, quality notes, assignments and
exam help:
email:
WhatsApp: +254792947610
, • Total interest earned on the company’s only fixed deposit account amounted to R75
000.
• Equity shares held in Nexus Works Ltd, a South African resident company, yielded
dividends amounting to R140 000.
• Dividends amounting to R53 200 were received in respect of the 15% interest held
in the equity shares and voting rights of Aurora Innovations, a company based in
Sweden.
• The 5% interest held in the equity shares and voting rights of Equinox Industries, a
manufacturing company effectively managed in France, yielded dividends amounting
to R44 100.
4. The depreciation expense relates to the following assets: Asset Acquisition date
Purchase price (R) Notes Sebenza building 1 June 2014 R1 520 000
4.1 Specialised delivery truck ?? ??
4.2 Patent 12 February 2024 R220 000
4.3 Manufacturing machine 1 September 2022 R465 000
4.4 Sebenza building was acquired on 1 June 2014 at a total cost of R1 520 000 to
house Crystal’s manufacturing operations.
4.1 During the 2024 financial year, a vigorous cost-benefit analysis was performed to
evaluate the financial viability of modernising, expanding, and maintaining Sebenza
building to meet the sky rocketing demand for glass products. The results of the cost-
benefit analysis influenced the decision to sell the Sebenza building and rather obtain
the required manufacturing space through a lease arrangement. The Sebenza building
was disposed of on 31 July 2023 for R1 200 000. On this date, Yabantu building, a
modernised factory building with increased production capacity was leased from
Zwillow Rentals (“ZR”), a South African property rental company. The lease
agreement signed by both Crystal and ZR contains the following clauses which apply
to the lessee: Lease commencement date 1 August 2023 Lease term 15 years with an
option to extend the agreement for another five years. Rental R15 000 payable
monthly in arrears with a 10% escalation after every 12 months period. Premium
R100 000 payable upfront on the commencement date of the lease. The amount is
For exam pack with questions and answers, quality notes, assignments and
exam help:
email:
WhatsApp: +254792947610
TAX3701
Assignment 2
Semester 1
2024
(798141) -
DUE 19 April
2024
QUESTIONS WITH WELL OUTLINED ANSWERS
[Date]
,TAX3701 Assignment 2 Semester 1 2024 (798141) - DUE 19
April 2024
QUESTION 1 (40 marks, 72 minutes)
Crystal (Pty) Ltd (“Crystal”) is a South African resident company with a 31 March
financial year end. The company is a leading manufacturer and distributor of float
glass, laminated glass, and various mirror products to customers in and outside South
Africa. Crystal is registered as a category A vendor for Value-Added Tax (VAT)
purposes and is not a Small Business Corporation as defined in section 12E of the
Income Tax Act no.58 of 1962. The South Africa Revenue Service (SARS) recognises
Crystal’s manufacturing processes as approved processes of manufacture. All amounts
exclude VAT unless stated otherwise. The following income and expenditure
statement was prepared by Crystal’s accountant for the financial year ended 31 March
2024: Notes Amount (R) Income Revenue 1 3 450 000 Cost of sales 2 (887 500)
Investment income 3 312 300 Expenditure Depreciation expense 4 (427 640) Payment
to Mrs Van Louw 5 (240 000) Net profit before tax 2 207 160 Notes:
1. Revenue from sales made to customers situated outside South Africa amounted to
R1 034 000. This amount is not yet accounted for in the above income and
expenditure statement.
2. The cost of sales amount was determined as follows: R Opening
stock…………………………………….. 404 000
Purchases…………………………………………. 725 000 Closing
stock……………………………………… (241 500) Cost of
sales………………………………………. 887 500 The accountant was uncertain on
how to account for the closing stock. On 31 March 2024, it was found that some of
the closing stock items were damaged to an extent that it would be unethical for
Crystal to distribute them at discounted selling prices. These closing stock items are
included in the above closing stock figure at a total cost of R41 800.
3. During the 2023 financial year, Crystal embarked on a quest to diversify its
investments. Below is a summary of the returns earned on the company’s individual
investments for the 2024 financial year:
For exam pack with questions and answers, quality notes, assignments and
exam help:
email:
WhatsApp: +254792947610
, • Total interest earned on the company’s only fixed deposit account amounted to R75
000.
• Equity shares held in Nexus Works Ltd, a South African resident company, yielded
dividends amounting to R140 000.
• Dividends amounting to R53 200 were received in respect of the 15% interest held
in the equity shares and voting rights of Aurora Innovations, a company based in
Sweden.
• The 5% interest held in the equity shares and voting rights of Equinox Industries, a
manufacturing company effectively managed in France, yielded dividends amounting
to R44 100.
4. The depreciation expense relates to the following assets: Asset Acquisition date
Purchase price (R) Notes Sebenza building 1 June 2014 R1 520 000
4.1 Specialised delivery truck ?? ??
4.2 Patent 12 February 2024 R220 000
4.3 Manufacturing machine 1 September 2022 R465 000
4.4 Sebenza building was acquired on 1 June 2014 at a total cost of R1 520 000 to
house Crystal’s manufacturing operations.
4.1 During the 2024 financial year, a vigorous cost-benefit analysis was performed to
evaluate the financial viability of modernising, expanding, and maintaining Sebenza
building to meet the sky rocketing demand for glass products. The results of the cost-
benefit analysis influenced the decision to sell the Sebenza building and rather obtain
the required manufacturing space through a lease arrangement. The Sebenza building
was disposed of on 31 July 2023 for R1 200 000. On this date, Yabantu building, a
modernised factory building with increased production capacity was leased from
Zwillow Rentals (“ZR”), a South African property rental company. The lease
agreement signed by both Crystal and ZR contains the following clauses which apply
to the lessee: Lease commencement date 1 August 2023 Lease term 15 years with an
option to extend the agreement for another five years. Rental R15 000 payable
monthly in arrears with a 10% escalation after every 12 months period. Premium
R100 000 payable upfront on the commencement date of the lease. The amount is
For exam pack with questions and answers, quality notes, assignments and
exam help:
email:
WhatsApp: +254792947610
