QUESTION THREE [30]

Smiley Sharpener (Pty) Ltd has a current profit before tax of R500 000 for the year

ended 31 December 2022. Included in this figure is the below adjustments:

1. Telephone payment of R10 000 is due for 2022 but has not yet been paid

(deductible for tax purposes in the current year).

2. Unearned sales income of R36 000 received in advance in respect of 2023

(taxable in the current year).

3. Interest income of R14 000 is receivable (taxable in the current year).

4. The rent for the first month in 2023 of R20 000 has already been paid (deductible

for tax purposes in the current year).

5. Dividend income of R24 000 was earned during 2022 (not taxable).

6. A donation of R12 000 was paid during 2022 (not deductible for tax purposes).

7. Depreciation of R80 000 was expensed during the year. The tax authority has

calculated wear and tear to be R50 000.

The applicable tax rate is 30% on taxable profits. There are no other permanent or

temporary differences other than those apparent from the above information. No

dividends were declared during the year.

Required:

2.1

Calculate the taxable profit, current tax and deferred tax for the year.

(20)

2.2

Prepare the taxation note for 31 December 2022.

(10)