Bonsai (Pty) Ltd is involved in the supply of plants, koi fish, feeding products, and other accessories for marine life. The company had the following income and expenses for the year of assessment: R Sales 10 258 140 Less: Cost of sales (2 460 000) Gross profit 7 798 140 The company also had other income which comprised of R Dividends 1 500 000 Interest income 2 900 000 

1. Legal expenses of R40 000 were paid to attorneys Kloppers and Nkwe: 

R5 000 of the fee was for debt collection. 

R15 000 related to the drawing up of a restraint of trade agreement for an employee who had resigned to set up his own business. 

R20 000 related to a dispute when one of Bonsai (Pty) Ltd’s clients sued the company for supplying inferior products. Kloppers and Nkwe were unsuccessful in this dispute and were ordered to pay the client damages of R55 000 

2. Bonsai (Pty) Ltd pays a maintenance contractor to maintain the four koi ponds on its premises. The maintenance contractor is paid on an annual basis. On 1 November 2020, Bonsai (Pty) Ltd paid the maintenance contractor R90 000 to maintain the koi ponds from 1 November 2020 to 31 October 2022. This is the only prepaid expense incurred by Bonsai (Pty) Ltd for its 2022 year of assessment. 

3. Bonsai (Pty) Ltd paid R750 to Geoff Handyman for repairing an electrical point that was damaged in a heavy storm. 

4. Bonsai (Pty) Ltd, entered into an agreement with one of its employees who resigned from employment on 1 March 2020. In terms of this agreement, the ex-employee would not render her services anywhere in Gauteng for a period of five years commencing on 1 March 2020. In return for not being allowed to render a service for a period of five years, the company compensated the employee by awarding her R250 000 on 1 March 2020. 

5. The following bad debts were written off during the year of assessment ended 31 January 2022: 

Trade debtors (note 1) = 84 000  

Loan to the supplier (note 2) = 120 000 The following bad debts was written off during the previous year of assessment and was recouped during the year of assessment ended 31 January 2022 

Trade debtors = 50 000 

Investment in Pyramid Scheme = 50 000 (The liquidators paid 5c for each rand invested) 5 000. 

Notes: 

Note 1 The accounting provision (according to the list) for doubtful debts amounted to R190 000 on 31 January 2020 (consisting of R150 000 for trade debtors and R40 000 for a loan to an employee (Elsie Bent)), and R220 000 on 31 January 2022 (consisting of R180 000 for trade debtors and R40 000 for a loan to an employee (Elsie Bent)). 

Note 2 The loan was granted to relieve the financial difficulties of the supplier. The company is not in the business of providing loans. 

6. On 5 January 2022, the company granted 3 000 shares to each and every one of its 90 permanent employees at a consideration of R0,50 a share. These shares have a nominal value of R1 each. Their market value was R5 a share on the date that the grants were approved. No restrictions apply to these shares. The plan in terms of which the shares were issued by the company qualifies as a broad-based employee share plan in terms of section 8B. 7. The company paid the following annuities to former employees: 

R45 000 to an ex-employee who retired due to old age during the current year of assessment  R20 000 for the next ten years to the dependants of an ex-employee (who had died in a motor vehicle accident when delivering toys to a client). 

8. The company entered into registered learnership agreements with Arnold Muller and Bianca du Plessis. The learnership agreements fulfil all the criteria of section 12H.  Arnold Muller On 1 October 2020, the company employed Arnold Muller as a “learner” on a full-time basis, with a level 6 NQF qualification. In terms of the registered learnership agreement, the leadership will be completed after two years. Bianca du Plessis On 1 July 2020, the company employed Bianca du Plessis (a disabled person as defined in the Employment Equity Act 55 of 1998) as a “learner” on a part-time basis, with a level 7 NQF qualification. In terms of the registered learnership agreement, the leadership will be completed after six months (26 weeks). 

9. Trading stock:  Purchases of trading stock of R2 500 000 were acquired during the year of assessment and the opening stock and the closing stock was R1 340 000 and R1 380 000. 

10. Some of the Raw materials for manufacturing are imported from Italy. The company purchased stock for €62 500 on 1 October 2019. The materials were delivered to the company on the 31st of December 2020. The customs duty value on entering the country was R62 000 and the import duties were R18 000. The purchase of the stock was settled in full on the 31st of March 2020. 

Assume that the sot rates of the relevant dates are as follows: 01 October 2019 €1=R18.70 31 January 2020 €1=R20.80 31 March 2020 €1=R10.40 11. The company had an assessed loss of R 240 000 from the 2020 year of assessment 12. The following donations were made during the current year of assessment: 

Non-public benefit organization = R120 000 

Public benefit organization = R170 000.

YOU ARE REQUIRED TO: 

Calculate the normal tax liability of Bonsai (Pty) Ltd for its year of assessment ending 31 January 2022.

Answer rating: 100% (QA)

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