Question Medix Limited (30 marks)

REQUIRED 1:

Tax calculation
2022 2021
R R

Profit before taxation as stated 1 100 000½ 160 000½

Permanent differences (18 000) (6 000)

Dividends received (2 000) ½ (8 000) ½
Penalties paid to SARS 8 000 ½ 2 000 ½
Capital profit on disposal of manufacturing (60 000) √ -
equipment (R180 000 – R120 000)
Taxable capital gain ((R180 000 – R135 000) x 36 000√ -
80%)
1 082 000 154 000
Temporary differences 109 000 (223 250)
Depreciation 950 000 √ 830 000 √
Wear and tear (800 000) √ (900 000) √
Profit on disposal of equipment ((R180 000 –
R72 000) – R60 000) (48 000) √ -
Recoupment on machinery
(R120 000 – R60 000) 60 000 √ -
Income received in advance 1 000 √ 6 000 √
Prepaid expenses (70 000) √ (250 000) √
Allowance for credit losses expense 8 000 ½ 1 000 ½
Allowance for credit losses (2 000) ½ (250) ½
Provision for leave pay 10 000 ½ 90 000½
(Tax loss) / Taxable income for the year before 1 191 000 (69 250)
assessed loss
Assessed loss carried forward (69 250)
(Tax loss) / Taxable income for the year 1 121 750 (69 250)

Tax rate 27% 27%

Current tax
(1 121 750 x 27%) 302 873 ½P 0 ½P
Deferred tax (10 732) 41 580
(109 000 x 27% on temporary differences) (29 430) ½P
(223 250x 27% on temporary differences) 60 278 ½P
(69 250 x 27% on assessed loss) 18 698 ½P (18 698) ½P
Income tax expense 292 141 41 580
(21)
Deduct ½ mark for interest paid, interest received or rent received in tax calculation – max to deduct
– 1 mark
REQUIRED 2:

MEDIX LIMITED
EXTRACT NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 √Format

4. INCOME TAX EXPENSE

2022 2021
R R
Major components of tax expense

Current tax expense – current year 302 873 ½P - ½P

Deferred tax
- Current year (10 732) ½P 41 580½P
- Rate change (R250 000 x 1/28) (8 929) √

292 141 32 651

(4)

Tax rate reconciliation

2022 2021
R R
Accounting profit 1 100 000 160 000

Applicable tax rate 27% 27%

Tax at standard rate 297 000 43 200

Tax effect of:

Dividends received (540) ½ (2 160) ½
Penalties paid to SARS 2 160 ½ 540 ½
Capital profit on disposal of manufacturing (16 200) ½ -
equipment (R60 000 x 27%)
Taxable capital gain (R36 000 x 27%) 9 720 ½ -
Rate change (8 929) √P
Income tax expense 292 141 32 651
Effective tax rate 26.56% ½ 20.41.% ½
(5)