FACULTY/COLLEGE
College of Business and Economics
SCHOOL
School of Accounting
DEPARTMENT
Accountancy
CAMPUS(ES)
APK
MODULE NAME
Taxation 3A
MODULE CODE
BEL3A01 / TAX03A3 / ADIA002 / S3PACQ3
SEMESTER
First
ASSESSMENT OPPORTUNITY,
Assessment Opportunity 01
MONTH AND YEAR
March 2022
ASSESSMENT DATE
18 March 2022
ASSESSOR(S)
Mr CD Anschutz
SESSION
08:30 – 10:30
Ms S Bulana
MODERATOR(S)
Ms S Mostert
Mr R Wessels
DURATION
2 hours (120 min)
TOTAL MARKS
NUMBER OF PAGES OF QUESTION PAPER (Including cover page)
80
8
INFORMATION / INSTRUCTIONS:
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Answers MUST be in your own handwriting and NOT typed electronically.
Once you have finished writing, you have 8 minutes to take pictures for Invigilator App and a further 22 minutes
to scan your answer and upload it to Blackboard (30 minutes in total). Make sure that the scanned document
is clear. Your uploaded document MUST be one document.
No photographs will be allowed and your upload MUST be complete before 11:00.
Allowances will be made at the discretion of the lecturer, but you will be penalised for late submissions
Read the questions carefully and answer only what is required.
Number your answers clearly and correctly as per the question paper.
This paper consists of 3 questions spread over 8 pages.
The marks shown against the requirement(s) for every question should be regarded as an indication of the
expected length and depth of your answer.
Round-off to the nearest Rand… i.e. no decimals are required.
Show all calculations clearly.
Write neatly and legibly and make sure that the scanned document is clear.
There is no need to scratch out the empty spaces in your script.
BEL3A01/TAX03A3
ASSESSMENT OPPORTUNITY 01
MARCH 2022
ADIA002/S3PACQ3
ASSESSMENT OPPORTUNITY 01
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QUESTION 1
[36 marks]
Maria Matshepo (hereafter “Maria”), a resident of the Republic, sells and repairs cell
phones from a shop she leases in a local shopping centre. She runs her business in
her own name (i.e. she is a sole proprietor) and is registered as a vendor on the invoice
basis.
An analysis of Maria’s income and expenditure for her two-month tax period ending
on 30 September 2021 is set out below. Unless otherwise stated, all amounts are
inclusive of value-added tax where applicable:
Income
Sales of cell phones
Repairs to cell phones
Interest
Indemnity award
Lay-by receipts towards cell phones still to be purchased
Expenditure
Bad debts
Bank charges
Bus coupons
Depreciation
Insurance premiums
Fuel (petrol and oil)
Printing and stationery
Purchases
Salaries
Rentals
Note
1
2
3
4
5
6
7
R
207 000
29 900
3 220
5 175
5 750
3 910
920
1 035
13 966
4 370
4 485
1 564
160 425
41 400
13 340
Notes:
1.
Maria’s indemnity award of R5 175 cash was received from her insurer for two
cell phones that were stolen from her shop in June 2021.
2.
Bad debts written off by Maria of R3 876 comprised the following:

R1 035 owing by a long-standing customer of hers from a credit sale. This
customer has since emigrated, and she has been unable to trace the
customer.

R2 875 was lent to an employee of hers who left her employment without
repaying the loan.
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3.
Instead of giving an employee cash to cover his transport expenses to and from
work, Maria purchased bus coupons that she distributes to him on a weekly
basis. During this two-month period, she incurred R1 035 on purchasing bus
coupons.
4.
Depreciation (for the two-month tax period) is charged for the following assets
owned by Maria:

Manufacturing equipment and tools that were purchased by Maria
during a previous tax period for R276 000 (R240 000 plus valueadded tax of R36 000)
8 000

A computer that was purchased by Maria on 1 August 2021 for
R14 375 (R12 500 plus value-added tax of R1 875)
695

Maria purchased a motorcar (as defined) for R316 250 (R275 000
plus value-added tax of R41 250). She has the sole use of this
motorcar and can prove that her business travelling is 40% of her
total travelling.
5 271
13 966
5.
Maria’s insurance premiums of R4 370 were incurred for the following:
Manufacturing equipment and tools
Office computer
Motor car
Trading stock
6.
460
230
1 955
1 725
4 370
Maria’s purchases of R160 425 are made up as follows:
Purchases of new cell phones (all from vendors)
Second-hand cell phones purchased from vendors
Second-hand cell phones, purchased and paid for from non-vendors
126 500
17 250
16 675
160 425
Maria purchases second-hand cell phones from both vendors (for example,
auctioneers) and from non-registered persons (for example, private individuals
and deceased estates) she displays and sells second-hand cell phones in her
shop.
7.
Maria’s rentals of R13 340 are for the following:
Shop premises
10 925
Cash register
1 495
Urn (located in the shop to enable her employees, and herself, to make
tea or coffee)
920
13 340
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8.
In August 2020, Maria purchased accessories for R19 320 (R16 800 plus valueadded tax or R2 520) from a local supplier. She deducted input tax of R2 520 in
her tax period 1 August 2020 to 30 September 2020. She then encountered
problems with these accessories and paid the supplier only R14 490 (R12 600
plus value-added tax of R1 890) on 30 September 2020. She refused to settle
this account until the problems were resolved. Twelve months later, on 30
September 2021, R4 830 (4 200 plus value-added tax of R630) was still
outstanding despite numerous requests from her (to the supplier) for the
problems to be sorted out, and monthly demands having been received by her
from the supplier.
YOU ARE REQUIRED TO determine Maria Matshepo’s net value-added tax due to,
or from, the Commissioner, for the two month period ended 30 September 2021.
Provide reasons for value-added tax treatment including for R nil effects
Source: Graded Questions on Income Tax in South Africa
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QUESTION 2
[35 marks]
We-fix-it (Pty) Ltd (hereafter “WFI”) is a resident company that specialises in repairs
and maintenance of residential complexes in and around the Johannesburg suburb
Glenhazel. The sole shareholder is Elijah Friedman.
Elijah purchased the business in January 2020 from a friend who emigrated to
Canada. The financial year-end of WFI is on the last day of February.
The following information relates to the 2022 year of assessment of WFI. All amounts
provided are EXCLUDING VAT.
REVENUE
R
1.
Fees earned from repairs and maintenance
2.
Dividends received from JSE listed companies paid into the
bank account of WFI
Foreign dividends received from an overseas company in
which WFI owns less than 10% of the issued shares
3.
1 275 950
80 000
54 040
4.
Interest earned from South African banks
33 800
5.
Interest earned from a bank in America
16 882
EXPENSES
6.
Bad debts written off:
Trade debtors
Loan to painter (employee)
Interest on loan to painter
31 100
R25 500
5 100
500
Of the R25 500 listed above, R2 500 relates to a credit
transaction that took place in 2019. When Elijah acquired the
business in 2020, he also bought the debtors’ book.
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7.
WFI’s outstanding debtors as at 28 February 2022 amounted
to R53 500 and can be broken down as follows:
+30 days
25 000
+60 days
15 000
+90 days
9 000
+120 days
4 500
TOTAL
R53 500
It needs to be noted that:
 WFI does not apply IFRS 9; and
 none of the outstanding debts was covered by any form of
security.
The provision for doubtful debts allowed by SARS for the 2021
year of assessment was R6 500.
8.
WFI’s growth has been rapid and has happened to such an
extent that its premises were becoming insufficient.
On 1 June 2021, WFI entered into a lease agreement with a
new landlord who had premises that were more suitable to
WFI’s use – to be used for pure trading purposes. The
premises were also unoccupied at the time, so WFI could move
in immediately (which it did). Please ignore any possible capital
allowances on buildings for which the taxpayer could possibly
qualify for with regard to these premises.
On 1 June 2021, an amount of R114 000 was paid in respect
of rent for the period 1 June 2021 to 31 May 2022 (see
additional information below).
Additional information
 Lease period
10 years
 Lease premium
R65 000 (Payable 1 Jun 2021)
 Annual lease expense R114 000 (payable in advance)
 Leasehold improvements to the value of R50 000 should
be effected to the premises.
These improvements were completed on 1 February 2022
and immediately brought into use. The actual amount
incurred to carry out the improvements, was R65 000.
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9.
WFI incurred R760 000 for employee expenses as follows:
 R470 000 for cash salaries.
 R170 000 was paid to a pension fund on behalf of
employees.
 R10 000 per month was paid to the 16-year-old daughter
of a former plumber who passed away while employed by
WFI. The former plumber died in 2020 after Elijah had
already acquired the business. The former plumber died
without the knowledge of the fact that he had a daughter.
10.
In December 2021, WFI’s only electrician resigned. Elijah and
the electrician negotiated a restraint of trade agreement. WFI
would pay the electrician an amount of R90 000 as long as the
electrician agreed not to start a similar business to WFI within
the greater Johannesburg area for a period of two years.
The entire R90 000 constituted income in the hands of the
former electrician.
11.
The accountant of WFI paid the following amounts on the
stated dates:
 Annual cleaning service fees – R144 000 on 1 October
2021
 Insurance premiums of R121 000 paid in advance to
benefit from the cash off offer from its insurance broker.
The monthly insurance fee for WFI is R11 000, but the
standing discount offer from its insurance broker is clients
to pay a year’s premiums in advance for the benefit. This
payment was made on 1 November 2021
[11 x R11 000 = R121 000 vs 12 x R11 000 = R132 000 ]
(i.e. it saved R11 000 by paying in advance).
Please note that there are no other similar payments that
need to be considered as prepayments during the current
year of assessment.
12.
WFI made the following donations during the year of
assessment
 SPCA, a registered public benefit organisation and they
obtained a section 18A certificate for this donation.
 Elijah is an avid sports fan and believes in the uplifting
of schoolboy cricket. He authorised a donation of 20
55 000
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cricket bats (cost price R1 200 each) to King David
School which his grandson attends, along with R20 000
cash towards their fuel bill (for the mini-buses they use
to travel to away games)
YOU ARE REQUIRED TO calculate the taxable income of We-fix-it (Pty) Ltd for its
2022 year of assessment.
Provide a reason for the treatment of all amounts mentioned above in your
computation. Show all calculations clearly.
QUESTION 3
[9 marks]
SunPro (Pty) Ltd (“SunPro”) is a South African resident company that imports and
installs solar panels for houses and small businesses. The solar panels are used to
heat water or to generate electricity. SunPro is a category B VAT vendor. The company
has requested your assistance with its VAT calculations for the two-month VAT period
that ended on 31 December 2021.
There is a new solar panel manufacturer and supplier in Cape Town that commenced
business during 2021. The managing director of SunPro will fly from Johannesburg to
Cape Town for 3 days to meet with the supplier early in January 2022 to inspect their
products. He plans to take them to dinner.
YOU ARE REQUIRED TO explain in detail both the VAT (6 marks) and Income Tax
(3 marks) consequences of the cost of the flight and the dinner.
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