Interdict (Pty) Ltd is a category ‘G’ vendor i.e. the company has a one-month VAT period. Interdict is a retailer of industrial Machinery. The following information is given for March 2019. Ten machines were purchased at a cost of R2 850 000 (incl. VAT); all machines have the same cost of R285 000 each (incl. VAT). The standard mark up on cost (including VAT) is 50% i.e. cost plus VAT is then increased by 50% to derive the selling price. Five machines were sold for cash. One machine was sold in terms of an installment credit agreement. The contract provides for 60 monthly payments of R8 900 (at the end of the month), beginning at the end of March. One machine was leased in terms of a finance lease at a monthly rental of R8 000 (payable at the end of the month). An old machine which was held as opening stock and was reflected at R240 000 in the stock account of the ledger, was sold to Don Reece, at cost inclusive of VAT. Don who is a 20% shareholder of Interdict is not a vendor. 

The market value of this machine was R175 000 at the date of sale. On 25 March a second-hand machine was purchased from a non-vendor for R180 000. Its market value was R205 200. Interdict paid R100 000 immediately to secure the purchase and will pay a balance at the end of April. The second-hand machine in point 7 above was immediately sold to a vendor who was a connected person in relation to Interdict, for R200 000. On 1 March 2019, a fire in the warehouse totally destroyed 2 machines purchased in January for R319 200 (VAT incl) each. Interdict’s insurer paid out R280 000 for each machine as compensation on 25 March 2019. The fire also totally destroyed a truck that had been bought second-hand from a non-vendor the previous year. The insurer paid out compensation of R80 000 in respect of this truck. During March, Interdict purchased two new water bottles for the cold water dispensing machine in the staff canteen. These bottles cost R1 800 (VAT incl) each and were paid for, in March.

Required: Calculate the VAT effect in respect of the above transactions for the month of March 2019. Prepare you answer in Columnar format i.e. Have two columns, one for inputs and one for outputs.

Answer rating: 100% (QA)

VAT Effect for the Month of March 2019 Inputs Ten machines were purchased at a cost of R2 850 000 incl VAT all machines have the same cost of R285 000 ... View the full answer