FAC3701/101/2/2024
ASSIGNMENT 01 (Second semester) (30 marks)
WRITTEN ASSIGNMENT
TopStyle Ltd is a manufacturer and retailer of smartphone accessories. TopStyle Ltd was
incorporated on 1 July 2021. The profit before tax for the year ended 30 June 2023
amounted to R2 800 000, after taking into account the information below:
1. Administration building
The administration building was acquired on 1 October 2021 at a cost of R1 500 000 and on
this date, it was available for use, as intended by management. Depreciation on the
administration building is written off over its estimated useful life of 15 years according to the
straight-line method. A residual value of Rnil was allocated to the administration building.
The SA Revenue Service does not allow a tax allowance on the administration building. No
other administration buildings were acquired or sold during the year.
On 20 December 2021 TopStyle Ltd made a payment of R80 000 to an independent security
company, for security services to be rendered at the administration building for the period
from 1 January 2022 to 31 December 2022. The directors of TopStyle Ltd decided to employ
their own full time security staff from 1 January 2023. TopStyle Ltd paid security fees of
R30 000 to their own security staff for the period 1 January 2023 to 30 June 2023.
2. Delivery vehicles
The directors of TopStyle Ltd decided to replace the old delivery vehicles, used to distribute
their smartphone accessories, with hybrid delivery vehicles to decrease their operating
costs. On 1 January 2023 the old delivery vehicles were sold for R320 000. The old delivery
vehicles were acquired on 1 October 2021 at a cost of R300 000 and on this date, they were
available for use, as intended by management. On 30 June 2022 the carrying amount and
tax base of the old delivery vehicles amounted to R262 500 and R243 750 respectively. On
the date of sale, the carrying amount and tax base of the old delivery vehicles amounted to
R237 500 and R206 250 respectively.
On 3 January 2023 the new hybrid delivery vehicles were acquired for R600 000 and on this
date, they were available for use, as intended by management. No other delivery vehicles
were acquired or sold during the year.
Depreciation on delivery vehicles is written off over its estimated useful life of 6 years
according to the straight-line method. A residual value of R80 000 was allocated to the new
hybrid delivery vehicles (old delivery vehicles: Rnil). The wear and tear allowance on delivery
vehicles is written off over 4 years, apportioned for part of a year, according to the straight-
line method, in terms of section 11(e) of the Income Tax Act. The tax allowance on the old
delivery vehicles and the new hybrid delivery vehicles for the year ended 30 June 2023
amounted to R37 500 and R75 000 respectively.
During the current financial year TopStyle Ltd paid various traffic fines for traffic violations
committed by the company’s vehicle drivers, for which the company is liable for. The total
traffic fines paid for the current financial year amounted to R9 800.
3. Foreign income
Foreign income received from the United Kingdom for the current financial year amounted to
R210 000. The foreign income reived is correctly accounted for in profit before tax. This
income is not taxable in South Africa in terms of a double taxation agreement.
ASSIGNMENT 01 (Second semester) (30 marks)
WRITTEN ASSIGNMENT
TopStyle Ltd is a manufacturer and retailer of smartphone accessories. TopStyle Ltd was
incorporated on 1 July 2021. The profit before tax for the year ended 30 June 2023
amounted to R2 800 000, after taking into account the information below:
1. Administration building
The administration building was acquired on 1 October 2021 at a cost of R1 500 000 and on
this date, it was available for use, as intended by management. Depreciation on the
administration building is written off over its estimated useful life of 15 years according to the
straight-line method. A residual value of Rnil was allocated to the administration building.
The SA Revenue Service does not allow a tax allowance on the administration building. No
other administration buildings were acquired or sold during the year.
On 20 December 2021 TopStyle Ltd made a payment of R80 000 to an independent security
company, for security services to be rendered at the administration building for the period
from 1 January 2022 to 31 December 2022. The directors of TopStyle Ltd decided to employ
their own full time security staff from 1 January 2023. TopStyle Ltd paid security fees of
R30 000 to their own security staff for the period 1 January 2023 to 30 June 2023.
2. Delivery vehicles
The directors of TopStyle Ltd decided to replace the old delivery vehicles, used to distribute
their smartphone accessories, with hybrid delivery vehicles to decrease their operating
costs. On 1 January 2023 the old delivery vehicles were sold for R320 000. The old delivery
vehicles were acquired on 1 October 2021 at a cost of R300 000 and on this date, they were
available for use, as intended by management. On 30 June 2022 the carrying amount and
tax base of the old delivery vehicles amounted to R262 500 and R243 750 respectively. On
the date of sale, the carrying amount and tax base of the old delivery vehicles amounted to
R237 500 and R206 250 respectively.
On 3 January 2023 the new hybrid delivery vehicles were acquired for R600 000 and on this
date, they were available for use, as intended by management. No other delivery vehicles
were acquired or sold during the year.
Depreciation on delivery vehicles is written off over its estimated useful life of 6 years
according to the straight-line method. A residual value of R80 000 was allocated to the new
hybrid delivery vehicles (old delivery vehicles: Rnil). The wear and tear allowance on delivery
vehicles is written off over 4 years, apportioned for part of a year, according to the straight-
line method, in terms of section 11(e) of the Income Tax Act. The tax allowance on the old
delivery vehicles and the new hybrid delivery vehicles for the year ended 30 June 2023
amounted to R37 500 and R75 000 respectively.
During the current financial year TopStyle Ltd paid various traffic fines for traffic violations
committed by the company’s vehicle drivers, for which the company is liable for. The total
traffic fines paid for the current financial year amounted to R9 800.
3. Foreign income
Foreign income received from the United Kingdom for the current financial year amounted to
R210 000. The foreign income reived is correctly accounted for in profit before tax. This
income is not taxable in South Africa in terms of a double taxation agreement.
