Question 2. Bravo Ltd manufactures wooden doors and tables in Durban. As a student with tax knowledge, you have been approached by the managing director to assist in calculating the taxable income of Bravo Ltd for the financial year ending 28 February 2023. The managing director has provided you with the following information for the financial year ending 28 February 2023:

R

Sales

950 000

Cost of sales

250 000

Salaries and wages

220 000

Vehicle costs (excluding wear and tear)

25 000

Lease fees on factory building and machinery

150 000

Pension fund and medical aid contributions on behalf of employees

35 000

Accounting fees

8 000

Additional information:

• On 01 December 2022, Bravo bought a part of the new factory from a property development company at the cost of R2 000 000.

• On 01 February 2023, Bravo paid R45 000 to lease a freeway billboard for 12 months.

• Bravo paid a monthly annuity of R600 for the spouse of a former employee and R500 for the child of the same employee from 01 March 2022 onwards.

• On 01 May 2022, Bravo bought a vehicle for R200 000. The vehicle was stolen on 31 October 2022, and the insurance paid Bravo R120 000.

• Bravo bought a new wood-cutting machine on 15 February 2023 for R60 000 and immediately brought the machine into use.

• On 01 May 2022, Bravo completed the construction of the factory’s extension for R230 000. The construction was required in the factory’s lease agreement to extend the premises. The lease agreement stipulated that the work should cost R200 000. The lease was signed on 01 March 2022 for a 10-year period.

• Bravo had a debtors’ list of R8 000 (of these, R2 000 were less than 60 days, R 1 500 were aged 61-120 days, and R4 500 were older than 120 days). Bravo

6 HIT1181-Jul-Dec2023-FA1-AM-V3-10072023

does not apply IFRS 9. SARS had a Section 11(j) allowance of R1 000 in the previous year.

Required:

From the above information, calculate Bravo Ltd.’s taxable income for the financial year ending 28 February 2023 (ignore VAT implications).

N.B. Round-off calculations to two decimal places.

Answer rating: 100% (QA)

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