GENERAL DEDUCTION FORMULA ASSIGNMENT

Mukwa (Pvt) Limited is a Zimbabwean registered company which carries on business in Harare as a
manufacturer of a popular range of furniture.

The company’s financial statements for the year ended 31st December 2021 showed a net profit before tax figure
of $19 920 000 after the following debits and credits:

Credits

Insurance proceeds received note 1 276 000

Profit on sale of machinery note 2 38 400

Debits

Bad debt note 3 50 400

Bursary note 4 120 000

Depreciation 360 000

Donations note 5 8 160 000

Doubtful debts note 6 888 000

Entertainment note 7 105 600

Export promotion expenses note 8 148 800

General expenses note 9 230 400

Notes

1. Insurance payment
In July 2021, a Toyota Corolla vehicle which had been purchased in the December 2019 tax
year for $360 000 was involved in an accident and written off. The company received $276
000 from an insurance company.

2. Profit on sale of asset

Machinery which had been purchased for $72 000 in May 2019 was sold for $96 000 in the
current year.
 3. Bad debt
In March 2020, the company although not a money lender, advanced a loan of $48 000 to
anemployee to partly finance his studies. The employee unfortunately died in June 2021
before repaying the loan and interest due. The company has therefore decided to write off the
amount of the loan as well as the interest amount of $2 400 as a bad debt.

4. Bursary

The bursary of $120 000 is for a technical course in South Africa closely related to the
company’sfurniture business.

The course was undertaken by the company driver’s son who is employed by the company.

5. Donations

Cancer research institute 240 000

National bursary fund 3 600 000
Anti-retroviral drugs to Harare government hospital 4 320 000
8 160 000
6. Doubtful debts

This is made up of: Specific amount 312,000

General provision for doubtful debts 576 000
888 000

The specific amounts owed by government departments although disputed, have been
outstanding for over 90 days due to cash flow problems faced by the government.

7. Entertainment

Christmas party for customers 81 600

Staff Christmas party 24 000
105 600
8. Export promotion expenses

This was the cost incurred by the marketing manager on a trip to Zambia to explore new
markets.
9. General expenses
Theft of petty cash by employee 12 000
Registration of new trade mark 55 200
Replacement of car engine 96 000
Replacement of factory roof damaged by storm 67 200
230 400

10. Fixed assets

The income tax values (ITVs’) of assets as at the 31st December 2020 were:

Cost ITV at 31 Dec

2020

Computers 120 000 60 000

Machinery 288 000 144 000
Toyota Corolla 360 000 120 000
Special initial allowance (S.I.A) had been claimed on these assets in the year of
purchase.

Disposals

Machinery which had been purchased for $72 000 in May 2020 was
sold for $96 000 in thecurrent year.

REQUIRED
Calculate the minimum tax payable by Mukwa (Pvt) Ltd in respect of
the year ended 31stDecember 2021.