Thomas Shilongo, a resident of Namibia, started a printing business in Windhoek. He signed a 10 year

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Question:

Thomas Shilongo, a resident of Namibia, started a printing business in Windhoek. He signed a 10 year lease agreement for a premises in Prosperita on 1st July 2019. A monthly rental of N$9,000 is payable from the commencement of the lease. In addition, he is obliged to improve the buildings at a cost of N$500,000. A lease premium of N$40,000 was also payable on 1st July 2019. The improvements were completed on 1st January 2020 at a cost of N$525,000.

He also purchased a printer at a cash price of N$200,000. Delivery and transport charges were N$5,000 and installation costs amounted to N$4,900. The installation costs were incurred when an electrical power point had to be relocated to provide power to the printer at a cost of N$900 and when the floor had to be reinforced to hold the weight of the printer at a cost of N$4,000.

The income statement for the year of assessment 2020 revealed a net profit of N$790,000 after the following was taken into account:

Receipts and Accruals:

Local dividends were received from Old Mutual Namibia, N$9,000

Interest from a loan granted to Thomas's brother, N$11,000

Expenses:
i. Wages totalling N$112,000 were paid to employees. This amount consists of:
Permanent staff
N$80,000
Casual workers
N$23,000
Pension fund contribution for permanent staff
N$9,000
ii. Administrative expenses:
Permanent staff
N$112,000
Municipality
N$14,400
Telephone expenses
N$24,000
Included in the telephone amount is the purchase of a switchboard system valued at N$10,000.
iii. Annuities paid to employees:
4
Amos was killed during the construction of the building. Due to the poor financial status of his widow, the business decided to pay her an annuity of N$2,000 per month for the next 2 years. For the period under review she was paid N$6,000 which was due to her. Sam was injured in the same accident. Due to the severity of his injuries, he will not be able to take up employment. An annuity of N$5,000 per month is payable to him. For the period under review he was paid N$15,000 which was due to him.

iv. Depreciation:
Item
Purchase date
Cost Price(N$)
Depreciation(N$)
Nissan Bakkie
1/7/2019
125,000
16,667
Printing Equipment
1/7/2019
200,000
3,333
Office Furniture
1/1/2020
60,000
2,000
v. Bad Debts:
A loan was granted to Amos to enable him to do repairs on his private vehicle. Thomas Sparrow decided not to recover the sum from his widow. The amount of the loan was N$5,000 and interest was charged at a rate of 10%. Interest of N$125 was accounted for.

vi. Other deductible expenses, N$192,000
Required:
Calculate the taxable income of Thomas Shilongo for the 2020 year of assessment (29th February 2020). Commence your answer with the net profit of N$790,000 and show all your workings. Marks are allocated for the reasons where applicable. Round all amounts of to the nearest N$.