Chapter 12: Companies 123

QUESTION 12.7 (B)

(21 marks: 26 minutes)

Assume a company tax rate of 28% and a dividend tax rate of 20%.

Fidelio Ltd is a small record company. They have a December financial year-end.

The equity of Fidelio at 1 January 2008 comprised the following:

Share capital Class A 1 250 000

15% Class B shares of R2 each 200 000
Retained earnings 250 000
Revaluation surplus 100 000

The authorised share capital of the company is 2 million Class A Shares and 500 000 15%
Class B shares of R2 each.

Issued Class A shares at 31 December 2007 amounted to 1000000 and 100000 Class B shares
as at 31 December 2007.

The following transactions occurred during the year ended 31 December 2008:
1. 300 000 ordinary shares were issued at R3 per share on 30 April 2008.
2. 100 000 15 Class B shares were issued at R2 each on 1 January 2008.
3. Share issue expenses to the value of R50 000 were written off to the Share Capital:
Class A account.
4. The directors are authorised by special resolution, dated 1 December 2008, to issue 100
000 Class A shares of R1 before 31 December 2009.
5. An interim Class A dividend of R0.30 per share was declared on 31 March 2008.
6. A final Class A dividend of R0.20 per share was declared on 31 December.
7. 30% of the shareholders are South African resident companies.
8. The total comprehensive income for the year was equal to R800 000.
9. There was a revaluation of the company’s land and buildings equal to R200 000.
10. The company tax charge of R160 000 should be accrued for the current financial year.
11. The company received an assessment from the South African Revenue Services for the
2007 year of assessment. The assessment stated that a refund of R40 000 was due to
the company. The balance on the South African Revenue Services account at 1 January
2008 was a debit of R10 000. All prior tax years, except for 2007, had been finalised
before 1 January 2008.

YOU ARE REQUIRED TO:

1. Prepare the statement of changes in equity for the year ended 31 December 2008.
(12 marks)
2. Prepare the share capital note to the annual financial statements for the year ended
31 December 2008. (5 marks)
3. Calculate the company tax charge for the 2008 year of assessment. (4 marks)

9780190439507_Financial_Accounting_QB_5e_Masterset_Jan2020.indb 123 2020/01/29 01:43:37 PM