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
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