Summary TAX May Solution

SOLUTION TO QUESTION 1 May/June 2014
MONATE BAKERS
VAT Payable/refundable 28 February 2015 (2 month period)
Part A
VAT Output
Accountant's Total Output VAT (given) 93 600
Cash sales - reversal of accountant's output vat -56 123
cash sales were exclusive of VAT therefore you need -
to apply 15% and not 15/115 -
R457 000 x 15% 68 550
Interest on loan - reversal of accountant's output vat -198
- interest is a financial service and therefore exempt -
Indemnity payments - reversal of accountant's output vat -21 000
time of supply is date payment is received
payment was received after 28/02/2015 and
therefore falls outside of the VAT period -
Fringe benefit
reversal of accountant's output vat -16 279
Correct calc (R96 900 x 100/115 x 0,6% x 15/115 x 2 months) 132
Adjusted Output VAT 68 682

VAT Input
Accountant's Total Input VAT (given) 51 811
Baking ingredients – no adjustment -
Baking ovens - reversal of accountant's input vat -5 250
- Notional input VAT lower of cost R37 500 or MV R33 000
33000 x 15/115 4 304
Donation - reversal of accountant's input vat -1 070
- no input vat, as there is no consideration -
Salaries - reversal of accountant's input vat -19 600
- not a supply -
Municipal rates - reversal of accountant's input vat -360
- zero-rated supply -
Depreciation - reversal of accountant's input vat -2 151
- not a supply


Adjusted Input VAT 27 684
Vat Refund (Vat output less Vat input) 40 998

, SOLUTION TO QUESTION 2
Part a
Orion Industries
TAXABLE INCOME FOR THE YEAR ENDED 31/03/2015
Taxable income

Sales 4 620 000

Purchases (1 840 000)
Less opening stock - lower of cost or market value (375 000)
Add closing stock - lower of cost or market value 680 000

Doubtful debt allowance 25% x 104820 (26 205)

Design A for tennis bracelet (R34 600 x 10%) (3 460)
Trademark renewal (9 500)

Foreign exchange gain/(loss)
Machine PP
Cost price (1 December 2014) (€86 700 x R14,54) 1 260 618
Plus: Airfreight, customs and insurance costs 54 300
Total cost 1 314 918

Capital allowances Cost x 40% (525 967)

Foreign exchange loss on exchange item: foreign creditor
(€86 700 x (R14,54 - R15,85) (113 577)

Learnership agreements
Commencement - Lindile Mabuso (R40 000 x 9/12) (30 000)
Commencement - Jason Armstrong (Disabled) (R60 000 x 9/12) (45 000)

Completion - Lindile Mabuso (40 000)
Completion - Jason Armstrong (60 000)

Leasehold improvements

Rentals (12500 x 10) (125 000)

Leasehold improvements (R620 000/ (240-5) x 4) (10 553)

Excess expenditure (680 000 - 620 000)x5% (3 000)

Disposal of computers
Selling price limited to cost (R12 800 x 100/114 x 3) 33 684
Less tax value 24 328
Cost (R12 800 x 100/114 x 3) 33 684
Less allowances py 2014 - R33 684/3 x 3/12 (2 807)
Less allowances cy 2015 - R33 684/3 x 7/12 (6 550) (6 550)