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ATX812S-ADVANCED TAXATION-1ST OPP-NOV 2024 |
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nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 08BOAH LEVEL: 8
COURSE CODE: ATX812S
COURSE NAME: ADVANCED TAXATION
DATE: November 2024
DURATION: 3 HOURS
PAPER:THEORYAND CALCULATIONS
MARl<S: 100
1st OPPORTUNITY EXAMINATION
EXAMINER(S) Dr. Moses Nyakuwanika
MODERATOR: Mrs. Marian Amakali
INSTRUCTIONS
1. Capture your full name, student number, mode of entry and assessment number on
the first page
2. Answer ALL the questions and manage your time properly.
3. Number each page correctly
4. Write clearly and neatly.
5. Do not write in pencil and do not use tip-ex, as this will not be marked.
6. The names of people and businesses used throughout this assessment do not reflect
the reality and may be purely coincidental.
7. SHOW ALL WORl<INGS!
THIS QUESTION PAPER CONSISTS OF 6 PAGES (including the front page)
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QUESTION 1
The following is the statement of comprehensive income of a farmer who commenced
farming 25 August 2023
Dividends received from Namibian companies
Fee for letting of machine
Grazinq fees
Interest received
Livestock sales
Produce sales (wool and fruit)
New irrigation equipment
Dams & Boreholes
Establishment of Orchards
New fencing
Roadmakinq
Soil erosion works
Fertilizers and manures
Food for livestock
General Farming expenses (All allowable)
Interest payable
Livestock purchases
Repair of damaged fencing
Seeds
Wages and rations
Wear and tear allowance (All allowable)
Total expenditure
Net profit
N$
25 000
12 360
13 600
3 420
15 340
7 500
5 250
9 360
13 960
6 340
34 200
3 900
2 980
21 556
14 800
N$
6 000'
9 600
21 000
1 920
831 000
114 220
189 556
794174
Notes
1) When he commenced farming, the executors of the estate of his late father
handed over to him 1 800 ewes (female sheep), 200 rams and 400 lambs. The
current market value of these animals at the date of his father's death was
N$650 000, and this was the fair market price on 25 August 2023. The standard
value of his livestock would have been N$12 800.
2) On 26 November 2023 he also received by way of donation from his uncle 600
ewes and 100 rams. At the date of the donation, the fair market value of these
animals was N$200 000. the standard value would have been N$4 200.
3) He has elected the standard values fixed by regulations.
4) During the year, his wife and his family consumed produce at an estimated cost
of N$3 500.
5) 24 ewes and 12 rams were donated to charitable institutions during the year.
These animals were acquired at a cost of N$6 700, but at the date of donation
their fair market value was N$10 800.
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6) On 28 February 2024 the numbers of livestock on hand were as follows: ewes
1 500, Rams 250, Lambs 400.
7) The estimated cost of production of wool and fruit on hand on 28 February 2024
was N$9 100.
REQUIREMENT
You are required to calculate the taxable income of the farmer for the year of
assessment ended 28 February 2024
[25 marks]
QUESTION 2
a) What are the duties of the master of High Court in the administration of
deceased estate
[5 marks]
b) What is the purpose and what are the benefits of forming a trust [8 marks]
c) Describe the types of trusts that can be created
[7 marks]
TOTAL MARKS
[20 marks]
QUESTION 3
Paul (aged 34) and Sark (aged 65) started Vision Electronic on 1 March 2015 as a
partnership. Sark retired as a partner on 28 February 2023. One of Vision Electronics
employees, Nathaniel (aged) was admitted as a partner on 1 March 2023. Since 1
March 2023 Paul and Sark have shared profits and losses of partnership equally' the
statement of comprehensive income is provided for the partnership for the year of
assessment that ended on 28 February 2024:
Income
Gross income from tradinQ
Interest received on credit balance of bank account
Dividends (the partners own 100 000 of the ordinary shares of
Electron (Ptv) Ltd and received a dividend of N$2.60 per share)
Expenses
Salaries paid to employees (the partnership employed 4 employees
throughout the year of assessment who each received an annual
salary of N$80 000
Unemployment insurance fund contributions (UIF) and skill
development levies (SOL) in respect of employee's salaries
Salaries paid to partners (N$250 000 to each partner)
Contribution to employee's pension fund (the partnership contributes
an amount equal to 8% of its employees' salaries to a pension fund
on behalf of the employees)
Contribution to partners pension fund (the partnership contributes an
equal amount equal to 8% of its partners salaries to a pension fund
on behalf of the partners)
N$
830 000
3 200
260 000
(320 000)
(6 400)
(500 000)
(25 600)
(40 000)
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Contribution to medical scheme (the partnership contributes N$1
000 per month per employee and per partner to a medical aid
scheme)
Short-term insurance premiums
Life insurance premiums on the lives of partners
Depreciation on office furniture (the office furniture was purchased
on 1 March 2017 for N$75 000. The office furniture is depreciated
over 4 years for accountinQ purposes.
Interest paid in respect of partners capital contributions (Paul and
Nathaniel each contributed N$100 000 respectively on 1 March 2015
and 1 March 2023. Interest on the partners capital contributions is
calculated at the end of each year at the rate of 12% per annum)
Net profit
(72 000)
(68 000)
(3 600)
(18750)
(24 000)
14 850
Additional information relating to Nathaniel:
He was an employee of Vision Electronic for the period 1 March 2015 to 28
February 2023. During the 2023 year of assessment, he received a salary of
N$120 000 from Vision Electronic. This amount was used to calculate Vison
Electronic contribution to a pension fund on Nathaniels behalf.
He contributed 8% of his monthly salary from the partnership to the partnerships
pension fund in addition to the partnership contribution.
He contributes N$680 per month to a retirement annuity fund.
He contributes N$850 per month to a medical scheme in addition to the
partnership's contribution. Nathaniel is the only dependent on the scheme.
He received N$36 000 net rental income during the 2024 year of assessment.
Assume that the salaries paid to partners and employees qualify as approved
remuneration and that the Commissioner will allow a deduction of up to 20% of such
approved remuneration.
REQUIREMENT
You are required to calculate Nathaniel's taxable income for 2024 year of assessment.
[25 marks]
QUESTION 4
ABC Enterprise is a company in the business of manufacturing domestic and office
furniture for both the local and export markets. The following financial statements were
submitted to NamRA for assessment for tax year ended 31 December 2023.
Gross Profit
Other income:
Export incentive bonus
Note
N$
30 000 000
400 000
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Interest from commercial bank
Dividends: Ok Namibia Ltd
Profit on disposal of Mercedes Benz
Less expenses:
Administration expenses
Distribution Expenses
Other expenses
Repairs and maintenance
Miscellaneous
Bad debts
Donations
Net profit
100 000
105 000
2
20 000
3
2 390 500
4
4 200 000
5
1 320 500
2 800 000
6
870 000
720 000
7
1 000 000
17 324 000
Additional information
1. The company had the following assets in its asset register as at 1 January 2023.
Asset
Freehold land
Date acquired/Constructed
1 March 2019
Cost N$
800 000
Manufacturing building
1 March 2019
850 000
Administration block
Computer Equipment
10 September 2020
June 2021
700 000
180 000
5 passenger motor vehicles August2022
700 000
Commercial vehicle
1 April 2021
600 000
Staff bus
30 November 2022
540 000
The manufacturing building was acquired together with business stand, the
administration block was however, constructed. The company had a policy of
claiming maximum capital allowances possible on fixed assets.
2. A Mercedes Benz with a book value of N$90 000 was involved in an accident
on 31 October 2023. The company received N$110 000 as compensation from
Insurance Company. The car was bought for N$150 000. The Mercedes Benz
is of the passenger motor vehicles, two of the passenger Motor Vehicle were
bought for N$140 000 each and the other two cars were bought for N$270 000.
3. Administration expenses
Extension of administration building
Depreciation
General repairs and maintenance
General entertainment costs
Salaries and wages
Total
430 000
720 000
70 500
150 000
1 020 000
2 390 500
4. Distribution costs
ISelling and marketing
1 920 oooI
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VAT
Cost of sending sample to a potential customer in Botswana
Other distribution costs
Total
1 020 000
560 000
700 000
4 200 000
5. Other expenses
Ex-gratia payments (to former employee)
HR manaqer trade convention costs
Interest on loan: the loan was used on extension of
Administration block
Cash stolen by cashier
Total
410 000
200 000
350 000
360 500
1 320 500
6. Miscellaneous
Penalty on breaching customs procedures
Legal cost of being sued by a customer
Interest charqed on overdue PAYE
Repairs to CEOs Dorado house
Total
120 000
330 000
160 000
260 000
870 000
7. Donations
Chief executive's wedding
National scholarship fund
Total
200 000
800 000
1 000 000
REQUIRED:
Calculate minimum tax liability for ABC Enterprise for the year ended 31 December
2023
[30 Marks]