SUMMERSTRAND CAMPUS (SOUTH)

JULY 2020 END of MODULE ASSESSMENT 3

MODULE DESCRIPTION : TAXATION AND ESTATE PLANNING III

MODULE CODE : RT/RTV301/RT351

FACULTY : BUSINESS AND ECONOMIC SCIENCES

QUALIFICATION : BCOM

TEST DATE : 16 July 2020

PAGES : 3 (including cover page)

ADDENDUMS : See separate document

EXAMINERS : A Le Roux
C Fourie
H Hafkey

MODERATOR : Prof A Brettenny (internal)

Mr R Carpenter (external)

INSTRUCTIONS:

1 You will be required to submit a written solution, including all workings, like an assignment, by
the submission deadline.

2 Write both your name and student number, as well as the page number, on each page that you are
submitting.

3 Important: provide suitable substantiating reasons and/or workings in support of your answers.

4 Calculators may be used. Calculations should be made to the nearest rand unless it is obvious that
cents are required.

5 It is your responsibility to check that you have scanned in ALL pages and that all pages are clear
to read.

6 Do not discuss the paper with anyone during the 30-hour window period.

7 Please use your initiative to deal with any perceived errors or ambiguities in the paper.

8 Any assumptions made must be clearly stated.

QUESTIONS MARKS MINUTES

QUESTION 1 33 40

TOTAL 33 40
 Page 2 of 3 pages

QUESTION 1 (33 Marks : 40 Minutes)

This question comprises four (4) unrelated parts.

Part 1 (15 Marks : 18 Minutes)

Flyby Breweries (Pty) Ltd is a beer brewer in Port Elizabeth, South Africa. They brew different types of
craft beers and ciders. Their beers and ciders are sold in crates of twelve. The bottling can be purchased as
refundable or non-refundable. Their beers and ciders are sold to foreign and local wholesalers and local
taverns in and around the Eastern Cape.

The financial accountant of Flyby Breweries was appointed on 15 April 2020 and is struggling with some of
the journal entries. She has therefore asked you for assistance. During the current two-month tax period
ending on 31 May 2020 the following transactions were queried by the accountant (all amounts are inclusive
of VAT, unless otherwise stated):

- A new motor car was purchased for R345 000. The use of the motor car was given to the sales
manager with effect from 1 May 2020. He is required to use it when he visits customers. He also
has the use of this motor car, free of charge for his domestic purposes.

- On 1 April 2020 and 1 May 2020 it paid R4 850 per month in advance for the lease of a one-
bedroomed flat. The use of the flat is given, free of charge, to an employee Alexa Piedt. Alexa's
remuneration proxy is R360 000.

- On 30 April 2020 empty second-hand crates were bought back from a non-vendor customer
amounting to R345.

- Hops Limited, a supplier of raw materials has granted Flyby Breweries with a 5% discount if their
account is settled within 30 days. On 6 April 2020, Flyby Breweries purchased raw materials
amounting to R123 050. On 30 April 2020 Flyby Breweries settled their account in full and paid
R116 898.

- JJ Tavern CC, a local customer of FlyBy Breweries purchased beer on credit which amounted to
R13 800 on 1 June 2018. An amount of R5 750 was paid by JJ Tavern CC on 13 August 2018.
FlyBy Breweries had tried for the last six months to unsuccessfully attempt to recover the balance
of R8 050 owing to it by JJ Tavern CC. On 31 May 2020, Flyby Breweries decided to write off the
balance as a bad debt.

YOU ARE REQUIRED to prepare the necessary journal entries to record the above transactions in the
general ledger of Flyby Breweries (Pty) Ltd. (15)

RT301 - End of Module Assessment - Pathway 1 - July 2020

 Page 3 of 3 pages

QUESTION 1 (continued)

Part 2 (3 Marks : 4 Minutes)

Tycoon (Pty) Ltd a manufacturer of armour and protective wear for the South African Police Services. The
company provides a transport facility for certain of its employees who do not have their own transport. It
purchased a second hand 12 seater mini-bus for R437 000 (including VAT) for this purpose.

The mini-bus was hijacked and stolen while on a trip between an employee's home and its business
premises. It has now received an insurance award of R148 200 for its stolen mini-bus. It is unsure whether
there are resulting value-added tax implications.

YOU ARE REQUIRED to inform Tycoon (Pty) Ltd of the VAT implications arising from the transactions
above relating to the mini-bus. (3)

Part 3 (5 Marks : 6 Minutes)

Property (Pty) Ltd operates as a property investor and developer. Property (Pty) Ltd is considering
developing a complex of holiday apartments at Muizenberg on the South coast, to sell to the general public.

The land that they want to purchase for this development is owned by one independent person. The
independent person is a widow who is not a registered VAT vendor. The widow inherited the land from her
husband a few years ago.

YOU ARE REQUIRED to advise Property (Pty) Ltd of the VAT implications arising from the purchase of
the land. (5)

Part 4 (10 Marks : 12 Minutes)

Boko (Pty) Ltd a manufacturer of cereal, specialising in oats. The company is situated in Upington, Northern
Cape.

On 29 February 2020 the company awarded ("gave") the factory manager a double-cab vehicle as a long-
service award. He had been working for the company for 17 years. The vehicle was acquired specifically
for that purpose and the cost to the company amounts to R287 500 including VAT.

In terms of Interpretation Note 47 read with binding general ruling No 7, the write-off period approved by
the Commissioner for the double-cab vehicle is 4 years.

YOU ARE REQUIRED TO briefly explain, with supporting calculations, both the VAT and income tax
implications of these transactions relevant to Boko (Pty) Ltd and the factory manager: give reasons for the
treatment of the transactions and show your workings. (10)

RT301 - End of Module Assessment - Pathway 1 - July 2020