CHINHOYI UNIVERSITY OF

TECHNOLOGY
Name Surname Reg #
Bridget R Guraukama C18132630K
Shawn Manga C18132876X
Grace N Pedzisai C18132443I
Tapiwanashe Madamombe C18133342K
Rudadiso Mhonda C18132696U
Danisa Ndhlovu C18132225U
Osward S T Mandoga C18132476W
Vimbai Natalie Madzanira C18133358R
Brandy T Kafaupungwa C18133459B
Cephas Tinoza C18133119G
 QUESTION 4: Bridget Garaukama
& Group
Taurai Bakeries Ltd entered into a 30-year operating
lease agreement with Tomato Tuxton Ltd for the
leasing of an industrial site. This lease agreement
stipulated that Taurai Bakeries Ltd would pay a
premium of ZWL$140,000 on 1 July 2020 and would
then erect a factory on the site at a cost of
ZWL$2,670,000. From July 2020, it would pay an
annual rental in advance of ZWL$200,000 a year
(subject to an annual increase of ZWL$30,000 each
year). The erection of the factory commenced on 1
August 2020 and was completed on 31 October 2020
at a cost of $3,240,000. It was brought into use on 1
November 2020.
Required:
(a) Calculate the Gross Income for Tomato
Tuxton Ltd for the year ended 31 December
2020. (10 marks)
(b) Compute Taurai Bakeries Ltd’s allowable
deductions for the year ended 31 December
2020. (10 marks)
Computation of Gross Income for Tomato
Tuxton Ltd for the year ended 31 December
2020.
𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑚𝑒𝑛𝑡
𝐿𝑒𝑎𝑠𝑒 𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑚𝑒𝑛𝑡 = 𝑙𝑒𝑎𝑠𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑟 10 𝑦𝑒𝑎𝑟𝑠
(𝑙𝑒𝑠𝑠𝑒𝑟)

2
= 2670000 ∗
120

= 𝑍𝑊𝐿$44500
Computation of Gross Income for Tomato
Tuxton Ltd for the year ended 31 December
2020.

𝑙𝑒𝑎𝑠𝑒 𝑟𝑒𝑛𝑡𝑎𝑙𝑠 = 200000

𝑠𝑖𝑛𝑐𝑒 𝑡ℎ𝑖𝑠 𝑤𝑎𝑠 𝑑𝑢𝑒 𝑎𝑛𝑑 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 𝑎𝑠 𝑝𝑒𝑟 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡
Computation of Gross Income for Tomato
Tuxton Ltd for the year ended 31 December
2020.

Details ZWL$
Lease premium 140 000
Lease rentals 200 000
Lease improvement 44 500
Gross income 384 500
Computation Taurai Bakeries Ltd’s allowable
deductions for the year ended 31 December 2020.
𝑃𝑟𝑒𝑚𝑖𝑢𝑚
lease premium = 𝑙𝑒𝑎𝑠𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑟 10 𝑦𝑒𝑎𝑟𝑠
(𝑙𝑒𝑠𝑠𝑒𝑟)

140000
= ∗ 0.5
10

= 𝑍𝑊𝐿$7000
Computation Taurai Bakeries Ltd’s allowable
deductions for the year ended 31 December 2020.

𝑙𝑒𝑎𝑠𝑒 𝑟𝑒𝑛𝑡𝑎𝑙𝑠 = 200000

𝑠𝑖𝑛𝑐𝑒 𝑡ℎ𝑖𝑠 𝑤𝑎𝑠 𝑑𝑢𝑒 𝑎𝑛𝑑 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 𝑎𝑠 𝑝𝑒𝑟 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡
Computation Taurai Bakeries Ltd’s allowable
deductions for the year ended 31 December 2020.
𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑚𝑒𝑛𝑡𝑠
lease 𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑚𝑒𝑛𝑡 = 𝑙𝑒𝑎𝑠𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑟 10 𝑦𝑒𝑎𝑟𝑠
(𝑙𝑒𝑠𝑠𝑒𝑟)

2
= 2670000 ∗
120

= ZWL$ 44500
Computation Taurai Bakeries Ltd’s allowable
deductions for the year ended 31 December 2020.

Details ZWL$

Lease premium 7 000

Lease rentals 200 000

Lease improvements 44 500

Allowable deduction 251 500