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GTA711S-TAXATION 310-2ND OPP-JULY 2022 |
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n Am I BI A u n IVE Rs ITY
OF SCIEnCE
TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENTOF ACCOUNTING,ECONOMICSAND FINANCE
QUALIFICATION: BACHELOROF ACCOUNTING
QUALIFICATIONCODE: 07BOAC
COURSE:TAXATION 310
SESSION:JULY2022
DURATION: 180 MINUTES
LEVEL: 7
COURSECODE: GTA711S
PAPER: THEORY& APPLICATION
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINERS:
Mrs. Z van der Walt; Ms V. Andrew & Mr V. Elago
MODERATOR:
Mrs F. Haimbala
INSTRUCTIONSTO CANDIDATES
1. This paper consists of 8 pages (excluding the cover page).
2. Answer all the questions in the answer book in blue or black ink.
3. Round off all amounts to the nearest Namibian Dollar, where applicable.
4. The names of people or businesses used throughout this examination paper do not reflect the
reality and may be purely coincidental.
5. Questions relating to the examination paper may be raised in the initial 30 minutes after the
commencement of the paper. Thereafter, candidates should use their own initiative to deal with
any perceived error or ambiguities and any assumptions made by the candidates should be clearly
stated.
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QUESTION 1
(20 Marks)
Cookie Lyon, 55-year-old Namibian citizen was an employee of "Empire State Records"
since 1 March 2002. During the year she decided she has enough and resigned on 31
January 2022.
Her receipts and accruals for the 2022 year of assessment include:
1. A monthly salary of N$40 000.
2. She received a motor vehicle allowance of N$126 000 for the year whilst
employed. Cost Price of the vehicle when bought in 2020 was N$210 000. Fuel
costs for the year was N$24 100, maintenance and insurance were N$19 000. The
total kilometers travelled for the year was 41,000 of which 27,000 was for business
purposes.
3. She c!lso received a housing allowance of N$9 000 per month. An approved
housing scheme with the NAMRA is in place.
4. A cellular phone allowance of N$300 per month. Her business calls amounted to
N$4 000 for the year. Cookie kept all the relevant records.
5. To show appreciation for her long service, Cookie was awarded N$10 000 during
March 2021.
6. On resignation, Cookie received N$300 000 lump sum from the pension fund and
N$100 000 from ABC Records. She immediately transferred one third of the lump
sum to an approved preservation fund.
7. The employer contributed 7% of Cookie's annual basic salary towards a pension
fund. Cookie's contribution amounts to 10% of her basic annual salary.
8. She bought a computer from her employer for N$2 000. The cost price when
purchased in 2020, was N$6 000 and the current market value is N$3 000.
9. A monthly annuity of N$1 500 as from 1 July 2016 received from Sanlam Namibia.
She purchased the annuity for a cash consideration of N$250 000. Her current life
expectancy is 22.65 years.
REQUIRED QUESTION 1:
MARKS
Calculate the normal tax payable by Cookie Lyon for the 2022 year of assessment.
20
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QUESTION 2
(10 Marks)
Wilka (Pty) Ltd (Namibia) is invoiced (INV001) for inventory purchased amounting to 3000 Pula,
by Nestor (Pty) Ltd (Botswana) on account on the invoice date. The exchange rate of Namibian
Dollar (NAO) to Botswana Pula on the transaction date is 1:0.70. On settlement date, the
exchange rate of NAO to Botswana Pula is 1:0.80.
REQUIRED QUESTION 2:
Journalise the above transactions on the following dates:
1. Transaction date
2. Settlement date
3. Assume the exchange rate on the settlement date is 1:0.60, record the journal reflecting this.
QUESTION 3
(30 Marks)
Lameck supplies you with the following information for the year ended 28 February 2022.
Annuity received
Cattle Sales
Maize sales
Grazing fees received
Land rentals received
Construction of dam - wages paid
Construction of dam - material purchased
Purchase of machinery - used for construction of dam
Cost of erection of fences
Cattle purchased
Interest paid on loan (See note 3 below)
General farming expenses - all deductible
Motor vehicle expenses (See note 2 below)
N$
22 000
840 000
120 000
4 000
8 000
8 000
13 900
17 000
6100
652 000
6 000
210 000
408 000
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Notes:
1. Lameck received a refund of pension contributions on 1 March 2021 of N$264 000 on
withdrawal from the fund. He used N$120 000 to purchase an annuity which will pay out
for a period of 10 years at N$2 000 per month as from 30 April 2021. His life expectancy
at that date was 14,61 years. He used another N$60 000 of the pension fund and paid it
into an approved Provident fund.
2. He purchased a Toyota Hilux 4 x 4 during the year for N$390 000 (including VAT). He
used it on the farm as well as going on holiday and private and business trips to
Otjiwarongo, Swakopmund, Windhoek etc. His logbook shows the following: Farm use 12
000 km. Holidays 15 000 km, going to town for business and private purposes 50/50. His
total kilometer reading on 28 February 2022 was 63 000 km. He spent N$18 000 on fuel,
oil and maintenance during the year.
3. A loan was acquired to purchase the new Toyota Hilux 4 x 4 in note 2 above.
REQUIRED QUESTION 3:
Calculate the taxable income of Lameck for the 2022 year of assessment.
MARKS
30
QUESTION 4
(25 Marks)
Automated Fun Cars Ltd ("AFC") is a Namibian resident with a 31 December year end. It
specializes in the manufacture and sale of various vehicles and vehicle accessories. Ignore any
VAT implications.
The company recorded an accounting profit of N$4 193 814, however, the bookkeeper has been
known to make certain errors in respect of record keeping and IFRS compliance.
The company's Statement of Profit or Loss and Other Comprehensive Income for the year ending
31 December 2021 is shown below:
Line Item
Note N$
Revenue
Cost of Sales
Gross Profit
Patent
Salaries and Wages
1
16 058 935
2
(6 390 088)
9 668 847
3
(25 000)
(1 445 000)
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Legal Expenses
Depreciation
Bad Debts Expense
Penalty paid to NamRA for late submission of tax returns
Warranty Provision Expense
Operating Profit
Net Profit
4
(50 000)
5
(170 833)
6
(1 552 200)
7
(220 000)
8
(2 012 000)
4 193 814
4 193 814
NOTES:
1. On 1 November 2021 the company received a large payment to supply a security company
with 2 custom made security trucks in the 2022 year. The upfront payment of N$950 000
was received in cash to supply one security truck in March 2022 and one in August 2022.
The full N$950 000 was included by the bookkeeper. The other revenue in the Statement
of Profit or Loss and other Comprehensive Income is correctly calculated in terms of
accounting.
2. The following could be relevant for the cost of sales line item:
• The company purchased trading stock of N$6 444 551 during the year.
• As per the trial balance, the opening balance of trading stock was N$2 300 500
and the closing balance N$2 354 963.
3. The company registered a patent in January 2021 and paid N$25 000. The useful life of
the patent is estimated at 10 years.
4. The legal expenses were incurred to sue a newspaper for damage to the company's brand
and public image after the newspaper made false and disparaging remarks about defects
in AFC's vehicles. The dispute is ongoing at year-end.
5. This depreciation relates to the following assets:
Asset
Cost
Delivery truck 800 000
A 1 000 sqm
manufacturing 750 000
facility
Current
MV
650 000
750 000
Accounting
Date
of Write
off Residual
acquisition Period
Value
30-Jun-21 6 years
12 000
01-Dec-21 20 years
90 000
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Note: The manufacturing facility is used to manufacture motor vehicles and accessories.
6. The opening balance of the list for doubtful debts was N$450 000 and by the end of the
year the balance of the list had increased to N$1 800 000 and related entirely to customer
debt. The bookkeeper created an allowance for the movement of R1 350 000.
The following were the debts that had been written off during the year of assessment:
Name of Debtor
East Rand Motors
TK Distributors
John Tshikambe
John Tshikambe
Type of Debt
Amount
Trading Debt
180 000
Trading Debt
20 000
Employee Loan
1 000
Interest on loan given to employee 200
7. Penalty paid to Nam RA for late submission of tax returns.
8. This provision was raised due to the warranty that was attached to the vehicles that were
sold by AFC and the possibility that customers may bring products in for repairs at AFC's
expense under this warranty. Therefore, AFC may incur future expenses in satisfying this
obligation.
The following information has not yet been included in the Statement of Profit or
Loss and other Comprehensive Income above, as the company's financial
accountant is unsure of the correct accounting treatment:
• The company entered into a new lease for a building to store motor vehicles until
they were sold. In terms of the lease which commenced on 1 September 2021 and
ends on 30 August 2041, AFC would have to make improvements to the building to
the value of N$300 000. The improvements were completed on 30 November 2021
at a cost of N$350 000. The lease rental is N$43 478 per month and in terms of the
lease AFC would have to pay an upfront premium of N$150 000.
• During the year the company donated N$60 000 to S O S Children's Village
Association of Namibia (Registered as a Welfare Organization). The bookkeeper did
not capture the transaction yet.
• On 1 December 2021 the company sold a luxury passenger vehicle that was used
by the Managing Director. The vehicle was used since June 2020 when the cost price
was N$560 000. The vehicle was sold for N$550 000. Depreciation is charged over
6 years, not apportioned and not in year of disposal. The bookkeeper did not account
for any part of this transaction.
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• The company needed new premises for the management and administration staff.
AFC signed a 2-year rental contract on 1 October 2021. The contract required
monthly payments of N$13 680, payable on the last day of the month,
Additional Information:
NamRA considers manufacturing of vehicles to be a process of manufacture.
REQUIRED QUESTION 4:
MARKS
Starting with accounting net profit, calculate AF C's final taxable income for the 2021
year of assessment. Give reasons where applicable, including where no 25
adiustment is needed.
QUESTION 5
(20 Marks)
YaToivo (Pty) Ltd ("YaToivo") manufactures and distributes Cuca beer. YaToivo has been
registered for VAT since 2019. Mrs. Kaarina, a director of the company, wants to appoint you as
the new Accountant; however, she first wants to test your VAT knowledge as it is an important
attribute required from their Accountants. During YaToivo's current two-month VAT period (which
ended on 30th November 2021) it entered into, amongst others, the following transactions.
1. Ya-Toivo sold three hundred crates of Cuca beer for cash to Shikulmbwati Bar in
Windhoek.
2. Ya-Toivo sold three truckloads (a truckload consists of 700 crates) on credit to Protea
(Pty) Ltd situated in Swakopmund.
3. Ya-Toivo sold and exported a 200 hundred crates of Cuca beer on credit to Singari (Pty)
Ltd in Ruanda, Angola.
4. On the 15 November Ya-Toivo purchased two new vehicles. (1.) A new Hilux pickup truck
for a Sales rep amounting N$375 000 (VAT exclusive), that will be used in making taxable
supplies. (2.) A new Mercedes Benz for the marketing manager, costing N$265,000 (VAT
exclusive). Ya-Toivo will pay Pupkewitz Toyota 30 days after the invoice date.
5. Wages for the cleaner amounted to N$4,000 per month.
6. Advertising, printing, re-labeling and marketing costs relating to the new improved Cuca
brands amounted to N$555,350 (VAT inclusive)
7. Mrs. Kaarina adopted the practice where she will provide the employees with free office
refreshments; this will create more productive employees. The costs of this benefit amount
to N$3,500 per month (VAT Inclusive). These expenses are paid out of the petty cash
register.
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NOTE:
Price list
One crate
Amount(lncl. VAT)
N$200.00
REQUIRED QUESTION 5:
MARKS
1. What are the requirements to register as a VAT vendor in Namibia?
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2. Calculate YaToivo's VAT liability relating to the above transactions for the 15
two-month VAT period ending 30 November 2021.
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Annexure A
Individual Incorn.e T· x
All individuals (incl. deceased estates and trusts) other than companies.
0 - so000
50 001 - 100 000
100 001 - 300 000
300 001 - 500 000
500 001 - 800 000
800 001 - 1 500 000
Above 1 500 000
Not taxable
18% for each NS above 50 000
9 000 + 25% for each NS above 100 000
59 000 + 28% for each N$ above 300 000
115 000 + 30% for each N$ above 500 000
205 000 + 32% for each N$ above 800 000
429 000 + 37% for each NS above 1 500 000
Housing loans and 111ortgage subsidies
Housing loans provided to employees at a subsidised rate are taxable to
the extent that the interest rate payable by the employee is less than 12%
per annum (p.a.). The taxable value of housing benefits comprising free or
subsidised housing is determined with reference to the location and size of the
housing, as indicated in the following table:
Windhoek
500
750
1,000 1,400 1,800 2,200 2,800 3,400 4,000
Walvis Bay
350
550
750
1,000 1,300 1,700 2,100 2,550 3,000
Large Towns 250
375
500
700
900
1,100 1,400 1,700 2,000
Small Towns 125
175
250 300
450
550
700
850
1,000
END OF FINAL EXAMINATION - FIRST OPPORTUNITY
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