,TAX3701 Assignment 2 (COMPLETE ANSWERS)
Semester 2 2024 (798141) - DUE 13 September 2024 ;
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QUESTION 1 (35 marks, 63 minutes) Tau Steelworks (Pty)
Ltd (Tau) is a South African company manufacturing a range
of steel products used in building construction for the local and
the export market. The company is not a small business
corporation as defined and is also registered as a VAT vendor
with the South African Revenue Service (SARS). The
company’s process of manufacturing has been approved by
SARS and its financial year ends on 29 February 2024. All
amounts exclude VAT unless specifically stated otherwise.
The accountant presented you with the following information
for the 2024 financial year: 1. The total sales amounted to R.
Included in this amount is an amount of R17 500 related to
export sales made to a client from Germany. On 25 February
2024 Tau received a letter from a German attorney,
representing the German client, that the German client has
filed for liquidation and was finally liquidated on 7 March
2024. 2. The cost of sales comprised the following: R Opening
stock Purchases Closing stock () Cost of sales The market
value of the opening stock on 1 March 2023 was R and the
market value of the closing stock on 29 February 2024 was R.
3. Tau paid the following employee related expenses for the
2024 tax year: • Salaries and wages – R. • Contributions to a
pension fund for all employees – R195 200. • An annuity of
, R52 500 to Mrs. Dorcas Mabete, the wife an employee who
died during the 2024 year of assessment. • Tau made a
restraint of trade payment of R150 000 to Mr. Ndlovu, the
marketing manager, who has retired on 31 December 2023.
Mr. Ndlovu is restrained from competing with Tau for four
years from the date of payment. The full amount is taxable in
the hands of Mr. Ndlovu. 4. Tau entered into a learnership
agreement with an employee with a NQF level 5 qualification
for a 12-month period on 1 August 2023. The employee was
still employed with Tau on 29 February 2024. 5. Tau received
a doubtful-debt allowance of R37 500 for the 2023 year of
assessment. The accountant provided you a list of doubtful
debts on 29 February 2024 amounting to R290 000. Of this
amount 80% is in arrears for more than 90 days, but less than
120 days. Tau does not apply IFRS 9. 6. Tau incurred the
following legal expenses for the 2024 year of assessment: •
R12 500 paid to Impi Attorneys for collecting outstanding
staff loans. • R17 870 paid to Vula Attorneys for collecting
outstanding debtors for sales. 4 QUESTION 1 (continued) 7.
Tau donated R150 000 to Abba Homes, a public-benefit
organisation and received the relevant section 18A income tax
certificate in this regard. 8. Tau purchased a new steel
manufacturing machine, Delta, from Italy on 30 November
2023 for $75 000. Machine Delta was by ship (FOB on 30
November 2023) and was received by Tau on 7 January 2024
and brough into use on 10 January 2024. The $75 000 was
paid on 15 March 2024 to the Italian supplier. The following
spot rates applied: 30 November 2023 $1 = R17.75 7 January
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