Assignment 2 (50 Marks) QUESTION 1 (38 MARKS) Fairview Mansions (Pty) Ltd is a resident of Namibia. Its sole asset is a rent producing property. The ground and first floors of the building are let to commercial tenants. The remaining three floors are let to residential tenants. Because it makes both taxable and exempt supplies for VAT purposes, the Receiver of Revenue has applied an output basis of apportionment to arrive at an acceptable input tax ratio of 40%. Its income and expenditure for its 2-month tax period ending 31st January 2018 is as follows (all amounts are inclusive of 15% VAT): Income Commercial rentals 4,600,000 Residential rentals 2,880,000 Interest charged on overdue rentals from commercial property 60,200 Interest charged on overdue rentals from residential tenants 29,925 Insurance payout (see note 1) 276,000 Expenditure Bank Charges 21,530 Audit fees 23,345 Wages 533,350 Repairs (see note 2) 218,500 Maintenance (see note 3) 25,530 Insurance premiums (see note 4) 40,020 Interest on mortgage bond 143,125

Page 13 of 15 Lift maintenance contract expenditure 3,450 Legal expenditure for new lease contracts; Commercial tenants 17,250 Residential tenants 26,450 Security 30,245 Bad debts (see note 5) 16,330 Entertainment expenditure (see note 6) 1,690 Telephone (see note 7) 2,415 Notes: 1. The insurance settlement of N$276,000 was for fire damage to the building. A fire had occurred at a take away outlet on the first floor. The fire damaged the take away outlet and also the flat situated directly above it. Compensation for the take away was N$218,500 and for the flat N$57,500. 2. It cost N$161,000 to repair the burnt take away and N$57,500 to repair the flat. 3. The maintenance cost of N$25,530 includes paint, paint brushes and other hardware items purchased to do maintenance work to the building. 4. Insurance premiums were incurred on the buildings. 5. Bad debts are made up of N$12,650 written off for residential tenants and the rest to commercial tenants. 6. The managing director takes the accountant and lawyer to lunch from time to time. 7. Fairview Mansions (Pty) Ltd pays both the leasing director and the maintenance managers telephone account. They both have to make business calls on a regular basis. The leasing director indicated that 30% of his calls were for business purposes. The telephone bill for the 2-month period was N$1,610. The maintenance managers indicated that 60% of his calls were for business purposes. The telephone bill for the 2month period was N$805.

Page 14 of 15 REQUIRED: YOU ARE REQUIRED TO CALCULATE THE VAT LIABILITY FOR THE 2-MONTH PERIOD ENDING 31ST JANUARY 2018. (38) Make use of the compulsory format below. Remember to indicate INPUT VAT without brackets (positive) and indicate OUTPUT VAT with brackets (negative). If no VAT is applicable you must provide a reason, as the reasons will carry marks. ITEM AMOUNT VAT INPUT/ (OUTPUT) Calculation/Reason E.g. Income: residential rentals E.g 1 200 000 E.g 0 E.g Exempt supply

.