BCOM ACC- FA3: Freddy Ltd

Freddy Ltd Solution

1. Taxable income
Profit before tax 42,500
Exempt differences 15,370
Legal Fees 900
SARS interest 720
Depreciation office building 18,750
Dividend income (5,000)
"Matching" profit 28,935
Temporary differences 11,000
Depreciation Plant & Machinery 43,750
Wear & Tear Plant & Machinery (35,000)
Loss on disposal of machinery (12 500 – 18 750) (Loss as CA exceeds proceeds) 6,250
Scrapping allowance on machinery (12 500 – 15 000) (2,500)
Increase in allowance for credit losses 4,000
Allowance for credit losses: 2022 (6 000 x 25%) 1,500
Allowance for credit losses: 2023 (10 000 x 25%) (2,500)
Prepaid insurance (4,500)
Taxable income before assessed loss 68,870
Assessed loss carried forward (29,000)
Taxable income 39,870

2. Deferred tax calculation

100% Temporary
CV TB (DTL) / DTA
OR 80% difference

Office building 356,250 375,000 80% Exempt -

Plant and machinery 32,500 26,000 100% 6,500 (1,820) DTL
Prepaid insurance 4,500 - 100% 4,500 (1,260) DTL
Allowance for credit losses (10,000) (2,500) 100% (7,500) 2,100 DTA
Closing Balance 3,500 (980) DTL
Opening Balance (Taxable TDS R4 060 / 28% = R14 500) -29,000 -8,120 DTL
Deductible temporary difference (CR P/L, DR DT SFP) 32,500 7,140

3. Income tax expense note

FREDDY LIMITED
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2023

Income tax expense

Major components of tax expense

SA Normal tax
Current 11,164
- Current year (39 870 x 28%) 11,164

Deferred 15,260
- Movement in temporary differences 7,140
- Unused tax loss utilised (29 000 x 28%) 8,120

26,424

Prepared by Shan Anderson 1 05/23/2024

 BCOM ACC- FA3: Freddy Ltd
Freddy Ltd Solution
Tax reconciliation
Profit before tax 42,500

Standard tax @ 28% 11,900

Exempt differences
Legal Fees (900 x 28%) 252
SARS interest (720 x 28%) 202
Depreciation office building (18 750 x 28%) 5,250
Dividend income (5000 x 28%) (1,400)

16,204

Prepared by Shan Anderson 2 05/23/2024