Xerox Printing (Pty) Ltd (Xerox) is a local manufacturer and supplier of printers and faxes. Its...
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Xerox Printing (Pty) Ltd (Xerox) is a local manufacturer and supplier of printers and faxes. Its year-end is 31 December 2016. Xerox has started its operations in January 2010 and has since inception grown considerably. During the current year, Xerox has made sales of N$13,800,000 and total purchases of N$9,800,000. The closing stock amounted to N$350,000 and the opening stock anly N$100,000. Running operating expenditure in the production of trade was N$3,080,000 of which N$2,000,000 related to salaries for the manufacturing team as well as support staff and management of the company. Xerox has leased two properties, one which is used for its manufacturing activities in Okahandja and the other for its head office in Windhoek. During the current year of assessment Xerox has built its own offices in the central business district of Windhoek. The date of completion of the building was 31 July 2016 costing Xerox N$3,300,000, Xerox was only able to move into the building on 01 September 2016. The monthly lease rental of its prior head office was N$16,500. Assume that the prior rental contract ended 31 August 2016. The manufacturing building was leased as from 01 June 2010. The lease term is 20 years. As part of the lease agreement, a lease premium of N$20,000 was payable upon inception of the lease as well as monthly rentals of N$15,000. The lease contract also stipulated that the lessee needs to make improvements to the value of N$750,000. The actual improvements cost only N$550,000 which was completed 02 January 2012. As the manufacturing site is outside of Windhoek, Xerox provides temporary housing for management who need to do periodic site visits to the manufacturing site. Thus Xerox has as from June 2010 also constructed housing for the management of the company close to the manufacturing site. The ownership of the properties all belong to Xerox and the total cost of construction to three houses was N$1,350,000 in total. During the year Xerox had created a provision for bad debts of N$120,000 (During 2016, N$80,000) based on the historic experience of defaulting debtors. Of the debtors, N$100,000 went bad in the current year of assessment. FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Xerox took out a 'Key-man Policy on Francois van der Walt, the chief operations officer, a resident of the Netherlands on February 2011, paying a monthly premium of N$4,500. As part of their business activities, Xerox had the following asset transactions: 1. Manufacturing machinery acquired in March 2012 at a cost of N$1,200,000 2. Motor Vehicle no. 1 was acquired in April 2012 at a cost of N$350,000. • Motor vehicle no. 1 was sold during the current year at a selling price of N$100,000. 3. Motor Vehicle no. 2 was acquired on 01 July 2015 at a cost of N$450,000. . During the current year of assessment, the motor vehicle no. 2 was taken out of use to donate it to a former employee of the company as a gift for his long-service. The market value at the date of donation was N$200,000. 4. Motor Vehicle no. 3 was acquired in April 2016 at a cost of N$550,000. 5. Furniture and Fittings acquired in August of 2015 at a cost of N$60,000. YOU ARE REQUIRED TO: Calculate the taxable profit of Xerox (Pty) Ltd for its year ended 31 December 2016. Xerox Printing (Pty) Ltd (Xerox) is a local manufacturer and supplier of printers and faxes. Its year-end is 31 December 2016. Xerox has started its operations in January 2010 and has since inception grown considerably. During the current year, Xerox has made sales of N$13,800,000 and total purchases of N$9,800,000. The closing stock amounted to N$350,000 and the opening stock anly N$100,000. Running operating expenditure in the production of trade was N$3,080,000 of which N$2,000,000 related to salaries for the manufacturing team as well as support staff and management of the company. Xerox has leased two properties, one which is used for its manufacturing activities in Okahandja and the other for its head office in Windhoek. During the current year of assessment Xerox has built its own offices in the central business district of Windhoek. The date of completion of the building was 31 July 2016 costing Xerox N$3,300,000, Xerox was only able to move into the building on 01 September 2016. The monthly lease rental of its prior head office was N$16,500. Assume that the prior rental contract ended 31 August 2016. The manufacturing building was leased as from 01 June 2010. The lease term is 20 years. As part of the lease agreement, a lease premium of N$20,000 was payable upon inception of the lease as well as monthly rentals of N$15,000. The lease contract also stipulated that the lessee needs to make improvements to the value of N$750,000. The actual improvements cost only N$550,000 which was completed 02 January 2012. As the manufacturing site is outside of Windhoek, Xerox provides temporary housing for management who need to do periodic site visits to the manufacturing site. Thus Xerox has as from June 2010 also constructed housing for the management of the company close to the manufacturing site. The ownership of the properties all belong to Xerox and the total cost of construction to three houses was N$1,350,000 in total. During the year Xerox had created a provision for bad debts of N$120,000 (During 2016, N$80,000) based on the historic experience of defaulting debtors. Of the debtors, N$100,000 went bad in the current year of assessment. FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Xerox took out a 'Key-man Policy on Francois van der Walt, the chief operations officer, a resident of the Netherlands on February 2011, paying a monthly premium of N$4,500. As part of their business activities, Xerox had the following asset transactions: 1. Manufacturing machinery acquired in March 2012 at a cost of N$1,200,000 2. Motor Vehicle no. 1 was acquired in April 2012 at a cost of N$350,000. • Motor vehicle no. 1 was sold during the current year at a selling price of N$100,000. 3. Motor Vehicle no. 2 was acquired on 01 July 2015 at a cost of N$450,000. . During the current year of assessment, the motor vehicle no. 2 was taken out of use to donate it to a former employee of the company as a gift for his long-service. The market value at the date of donation was N$200,000. 4. Motor Vehicle no. 3 was acquired in April 2016 at a cost of N$550,000. 5. Furniture and Fittings acquired in August of 2015 at a cost of N$60,000. YOU ARE REQUIRED TO: Calculate the taxable profit of Xerox (Pty) Ltd for its year ended 31 December 2016.
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