SOLUTION TO QUESTION 1
Part a
Veli Jeans
TAXABLE INCOME FOR THE YEAR ENDED 31/03/2014
Taxable income
Sales 7 500 000
Purchases (3 500 000)
Opening stock @ cost (955 000)
Closing stock - add back 2 050 000
Cost of jeans 2 050 000
Direct material 1 900 000
Maintenance of machines 400 000
Bonus- not manufacturing -
Damage to jeans (250 000)
Cost of Jackets - closing stock 210 000 210 000
Cost 800 000
Transport 10 000
Change in fashion (600 000)
T- shirts donated - recoupment @ Market value 200 000
Restraint of trade payment - R300 000/3 (1) (100 000)
Restraint for 2 years, but minimum write off is over 3 years
Machine S - capital allowances
(R798 000 x 100/114 = R700 000) x 20% (140 000)
Disposal of Machine M
Selling price limited to cost 930 000
Less tax value 380 000
Cost 950 000
Less allowances py 950 000 x 40% (380 000)
Less allowances cy 950000x 20% (190 000) (190 000)
Recoupment 550 000 550 000
Factory F - s13 building allowance R2 500 000 x 5% (125 000)
Doubtful debt allowance R80 000 x 25% (20 000)
Taxable income 5 480 000
Part a
Veli Jeans
TAXABLE INCOME FOR THE YEAR ENDED 31/03/2014
Taxable income
Sales 7 500 000
Purchases (3 500 000)
Opening stock @ cost (955 000)
Closing stock - add back 2 050 000
Cost of jeans 2 050 000
Direct material 1 900 000
Maintenance of machines 400 000
Bonus- not manufacturing -
Damage to jeans (250 000)
Cost of Jackets - closing stock 210 000 210 000
Cost 800 000
Transport 10 000
Change in fashion (600 000)
T- shirts donated - recoupment @ Market value 200 000
Restraint of trade payment - R300 000/3 (1) (100 000)
Restraint for 2 years, but minimum write off is over 3 years
Machine S - capital allowances
(R798 000 x 100/114 = R700 000) x 20% (140 000)
Disposal of Machine M
Selling price limited to cost 930 000
Less tax value 380 000
Cost 950 000
Less allowances py 950 000 x 40% (380 000)
Less allowances cy 950000x 20% (190 000) (190 000)
Recoupment 550 000 550 000
Factory F - s13 building allowance R2 500 000 x 5% (125 000)
Doubtful debt allowance R80 000 x 25% (20 000)
Taxable income 5 480 000