TAX3701 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18
September 2025
• Course • Taxation of Business Activities (
TAX3701) • Institution • University Of South Africa (Unisa)
• Book • A Student's Approach to Income Tax TAX3701
Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18 September 2025;
100% TRUSTED Complete, trusted solutions and explanations. Joseph Dlamini
Manufacturers (Pty) Ltd (JDM) is a company manufacturing a range of concrete
products for the building industry in South Africa. JDM is a registered VAT vendor,
and its year of assessments ends on 31 March 2025. JDM’s process of
manufacturing has been approved by SARS and is not a small business corporation
as defined. All amounts are exclusive of VAT unless stated otherwise. The
accountant has compiled the following information for the year of assessment
ended on 31 March 2025. Description Note Amount R Sales 1 Interest received 2 31
256 Dividends received 3 175 873 Insurance claim payment received 4 250 675
Sundry income 5 25 252 Cost of sales 6 () Salaries and wages 7 (3 871 350) Bad
debts 8 (150 250) Interest paid 9 (141 395) General expenses 10 (75 456)
Depreciation 11 (750 400) Restraint of trade payment 12 (320 000) Donations made
13 (360 250) Repairs and maintenance 14 (271 350) Insurance paid 15 (198 000)
Rent paid 16 (520 000) Property expenses 17 (5 850 250) Notes 1. Sales to South
African customers Included in the sales amount of R is a sale made to a building
contractor on 25 March 2025 amounting to R125 000. The building contractor
cancelled the sale due to cash flow problems and the all the goods were returned
to JDM on 26 March 2025. JDM has a gross profit percentage of 25% to the cost of
all manufactured concrete products. 2. Interest received The interest received
comprised the following: • Interest levied on overdue debtors’ accounts – R15 126 •
Interest received from investments – R16 130 3. Dividend received The dividends
received comprised the following: • Dividends received from investments in a
foreign company – R175 998 JDM holds 5% of the shares in the foreign company. 4.
Insurance claim payment received JDM received an amount of R250 675 (including
VAT) on 15 January 2025 from its insurance company for Machine DP that was
damaged beyond repair during normal operations. Machine DP was purchased
new on 4 April 2023 for R420 000 (excluding VAT) and brought into use on the
same date. 5. Sundry income The sundry income comprised the following: • Bad
,debts recovered from debtors written off during the 2024 tax year – R25 252 6.
Cost of sales The cost of sales amount of R comprised the following: • Opening
stock on 1 April 2024 – R4 251 327 (market value is R4 328 726) • Purchases of R •
Closing stock on 31 March 2024 – R5 007 752 (market value is R4 812 538) The
goods returned by the debtor on 26 March 2024 with a sales value of R125 000, as
indicated in note 1 above, has not been added back to the closing stock on 31
March 2025 and has not been considered in determining the market value of the
closing stock on 31 March 2025. The cost price and the market value of the
returned goods are the same. 7. Salaries and wages The salaries and wages
amount of R3 871 350 comprise the following: • Salaries and wages to all
employees – R3 551 900 • Company contributions to the pension fund for all
employees – R310 250 • Bribes paid to various traffic officials – R9 200 8. Bad debts
The bad debts amount comprised the following: • Actual bad debts of R15 250
relating to a debtor who was finally liquidated on 15 March 2025. • Doubtful debts
amounting to R135 000 on 31 March 2025. Only 80% of the R135 000 doubtful
debts are in arears for less than 90 days. JDM received a doubtful debt allowance
of R75 670 in the 2024 years of assessment. 9. Interest paid The interest paid
amount of R141 395 comprised the following: • Interest paid on long-term
borrowing to finance capital assets – R141 395. 10. General expenses The general
expenses amount of R75 456 comprised the following: • Advertising and marketing
of new products – R75 456. 11. Depreciation The depreciation amount of R750 400
relates to the following capital assets: • New computer equipment of R390 000
(excluding VAT) purchased on 1 May 2024 and brought into use on 1 June 2024. •
Sewen new delivery trucks were purchased on 1 June 2023 for a total amount of R3
565 000 (including VAT) and brought into use on the same day. • A second-hand
Machine OJ was purchased on 20 January 2025 for R720 000 (excluding VAT) and
brought into use on the same date. Machine OJ replaced Machine DP (refer to note
4 above). • Binding general ruling No. 7 allows for the following write-off periods: o
Computer equipment – 3 years o Delivery trucks – 4 years o Carports – 5 years 12.
Restraint of trade payment JDM made a restraint of trade payment of R390 000 on
31 January 2025 to Magic Ndlovu, the marketing manager. This payment was
made to restrain Magic Ndlovu from competing with JDM for the next two years
commencing on 31 January 2025. 13. Donations made The donations made of
R360 250 comprised the following: • R360 250 was donated to public benefit
organisation and the necessary section 18A income tax certificate was received on
25 March 2025. 14. Repairs and maintenance The repairs and maintenance
amount of R271 350 comprised the following: • R271 350 was spend on 1 February
2025 to erect ten carports for customer parking. 15. Insurance paid JDM paid its
annual insurance of R198 000 on 25 October 2024 for the period 1 November 2024
, to 31 October 2025. 16. Rent paid JDM paid rent of R520 000 for additional
warehouse storage for its manufactured products. 17. Property expenses JDM
purchased part of a new commercial building on 17 February 2025 for an amount
of R5 850 250 (including VAT) and used this building from 1 March 2025 as
additional office space for its operations. REQUIRED: Marks
✅ Structure of the Calculation:
Gross Income
Exempt Income
Deductions / Allowable Expenditure
Taxable Income
🧾 1. GROSS INCOME Description Amount (R) Notes Sales TBD See detailed calc
below Interest received 31,256 Fully taxable Insurance proceeds 217,109 See calc
below Sundry income (Bad debts recovered) 25,252 Fully taxable Restraint of trade
(capital recoupment) 195,000 See calc below 🔹 Sales Adjustment:
Original sale on 25 March 2025 (R125,000) was cancelled and goods returned on
26 March.
Therefore, this amount must be excluded from sales, and cost of sales + closing
stock adjusted accordingly.
Let’s calculate the sales and cost of sales first.
🧮 Cost of Sales Calculation
Given:
Opening stock: R4,251,327
Closing stock (book): R5,007,752
Purchases: Unknown
Gross profit margin: 25% on cost
Also:
Goods returned (sales value): R125,000
Gross profit % = 25% → Cost of returned goods = R125,.25 = R100,000
This R100,000 was not added back to closing stock → closing stock understated.
September 2025
• Course • Taxation of Business Activities (
TAX3701) • Institution • University Of South Africa (Unisa)
• Book • A Student's Approach to Income Tax TAX3701
Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18 September 2025;
100% TRUSTED Complete, trusted solutions and explanations. Joseph Dlamini
Manufacturers (Pty) Ltd (JDM) is a company manufacturing a range of concrete
products for the building industry in South Africa. JDM is a registered VAT vendor,
and its year of assessments ends on 31 March 2025. JDM’s process of
manufacturing has been approved by SARS and is not a small business corporation
as defined. All amounts are exclusive of VAT unless stated otherwise. The
accountant has compiled the following information for the year of assessment
ended on 31 March 2025. Description Note Amount R Sales 1 Interest received 2 31
256 Dividends received 3 175 873 Insurance claim payment received 4 250 675
Sundry income 5 25 252 Cost of sales 6 () Salaries and wages 7 (3 871 350) Bad
debts 8 (150 250) Interest paid 9 (141 395) General expenses 10 (75 456)
Depreciation 11 (750 400) Restraint of trade payment 12 (320 000) Donations made
13 (360 250) Repairs and maintenance 14 (271 350) Insurance paid 15 (198 000)
Rent paid 16 (520 000) Property expenses 17 (5 850 250) Notes 1. Sales to South
African customers Included in the sales amount of R is a sale made to a building
contractor on 25 March 2025 amounting to R125 000. The building contractor
cancelled the sale due to cash flow problems and the all the goods were returned
to JDM on 26 March 2025. JDM has a gross profit percentage of 25% to the cost of
all manufactured concrete products. 2. Interest received The interest received
comprised the following: • Interest levied on overdue debtors’ accounts – R15 126 •
Interest received from investments – R16 130 3. Dividend received The dividends
received comprised the following: • Dividends received from investments in a
foreign company – R175 998 JDM holds 5% of the shares in the foreign company. 4.
Insurance claim payment received JDM received an amount of R250 675 (including
VAT) on 15 January 2025 from its insurance company for Machine DP that was
damaged beyond repair during normal operations. Machine DP was purchased
new on 4 April 2023 for R420 000 (excluding VAT) and brought into use on the
same date. 5. Sundry income The sundry income comprised the following: • Bad
,debts recovered from debtors written off during the 2024 tax year – R25 252 6.
Cost of sales The cost of sales amount of R comprised the following: • Opening
stock on 1 April 2024 – R4 251 327 (market value is R4 328 726) • Purchases of R •
Closing stock on 31 March 2024 – R5 007 752 (market value is R4 812 538) The
goods returned by the debtor on 26 March 2024 with a sales value of R125 000, as
indicated in note 1 above, has not been added back to the closing stock on 31
March 2025 and has not been considered in determining the market value of the
closing stock on 31 March 2025. The cost price and the market value of the
returned goods are the same. 7. Salaries and wages The salaries and wages
amount of R3 871 350 comprise the following: • Salaries and wages to all
employees – R3 551 900 • Company contributions to the pension fund for all
employees – R310 250 • Bribes paid to various traffic officials – R9 200 8. Bad debts
The bad debts amount comprised the following: • Actual bad debts of R15 250
relating to a debtor who was finally liquidated on 15 March 2025. • Doubtful debts
amounting to R135 000 on 31 March 2025. Only 80% of the R135 000 doubtful
debts are in arears for less than 90 days. JDM received a doubtful debt allowance
of R75 670 in the 2024 years of assessment. 9. Interest paid The interest paid
amount of R141 395 comprised the following: • Interest paid on long-term
borrowing to finance capital assets – R141 395. 10. General expenses The general
expenses amount of R75 456 comprised the following: • Advertising and marketing
of new products – R75 456. 11. Depreciation The depreciation amount of R750 400
relates to the following capital assets: • New computer equipment of R390 000
(excluding VAT) purchased on 1 May 2024 and brought into use on 1 June 2024. •
Sewen new delivery trucks were purchased on 1 June 2023 for a total amount of R3
565 000 (including VAT) and brought into use on the same day. • A second-hand
Machine OJ was purchased on 20 January 2025 for R720 000 (excluding VAT) and
brought into use on the same date. Machine OJ replaced Machine DP (refer to note
4 above). • Binding general ruling No. 7 allows for the following write-off periods: o
Computer equipment – 3 years o Delivery trucks – 4 years o Carports – 5 years 12.
Restraint of trade payment JDM made a restraint of trade payment of R390 000 on
31 January 2025 to Magic Ndlovu, the marketing manager. This payment was
made to restrain Magic Ndlovu from competing with JDM for the next two years
commencing on 31 January 2025. 13. Donations made The donations made of
R360 250 comprised the following: • R360 250 was donated to public benefit
organisation and the necessary section 18A income tax certificate was received on
25 March 2025. 14. Repairs and maintenance The repairs and maintenance
amount of R271 350 comprised the following: • R271 350 was spend on 1 February
2025 to erect ten carports for customer parking. 15. Insurance paid JDM paid its
annual insurance of R198 000 on 25 October 2024 for the period 1 November 2024
, to 31 October 2025. 16. Rent paid JDM paid rent of R520 000 for additional
warehouse storage for its manufactured products. 17. Property expenses JDM
purchased part of a new commercial building on 17 February 2025 for an amount
of R5 850 250 (including VAT) and used this building from 1 March 2025 as
additional office space for its operations. REQUIRED: Marks
✅ Structure of the Calculation:
Gross Income
Exempt Income
Deductions / Allowable Expenditure
Taxable Income
🧾 1. GROSS INCOME Description Amount (R) Notes Sales TBD See detailed calc
below Interest received 31,256 Fully taxable Insurance proceeds 217,109 See calc
below Sundry income (Bad debts recovered) 25,252 Fully taxable Restraint of trade
(capital recoupment) 195,000 See calc below 🔹 Sales Adjustment:
Original sale on 25 March 2025 (R125,000) was cancelled and goods returned on
26 March.
Therefore, this amount must be excluded from sales, and cost of sales + closing
stock adjusted accordingly.
Let’s calculate the sales and cost of sales first.
🧮 Cost of Sales Calculation
Given:
Opening stock: R4,251,327
Closing stock (book): R5,007,752
Purchases: Unknown
Gross profit margin: 25% on cost
Also:
Goods returned (sales value): R125,000
Gross profit % = 25% → Cost of returned goods = R125,.25 = R100,000
This R100,000 was not added back to closing stock → closing stock understated.
