BACC 233 Assignment 2 Jan-Jun 2024

FACULTY OF COMMERCE
DEPARTMENT OF ACCOUNTING & AUDITING

BACC 403: TAX LAW AND PRACTICE
ASSIGNMENT 2
JAN - JUNE 2024
Instructions
• All assignments must be typed using New Times Roman font size 12, 1.5 line spaced,
referenced using 6th Edition APA Guidelines, justified both sides, include a standardized
cover page and uploaded as a SINGLE PDF file.
• It is the responsibility of the student to upload their assignments in time to avoid
inconveniences due to internet failure, system failure, power outages or any other unforeseen
circumstances. NO submission extensions will be granted by the Department after the
deadline.
• All queries for this assignment must be directed to the Course Leader whose contact
details are on the List of Course Leaders available on My Vista.
• Plagiarism is a serious academic offence. Credit will be given for well written and
referenced assignments. Please refer to the Tutorial Letter and other resources for more
information on academic writing.
Instructions
• Answer all Questions
QUESTION 1
A Farmers livestock trading account for the year ended 31 December 2023 reflects the following:
Herd Herd
350 Opening Stock 700,000.00 100 Sales (April) 1,650,000.00
Purchase (September
70 s ) 350,000.00 320 Closing Stock 640,000.00
Expenses 400,000.00
Profit 840,000.00
2,290,000.00 2,290,000.00
The Assessed Carrying Capacity of the Land (ACCL) is 300.
Required
(a) Restocking Allowance and Taxable Income for the year ended 31 December 2023. (9 marks)
(b) Outline the special deductions applicable to farmers in relation to the provisions contained in
the Income Tax Act Paragraph 2 of the 7th Schedule. (6 Marks)
QUESTION 2
Chimusimbe Pvt Ltd is a company carrying on business in Zimbabwe as a manufacturer. The following
information is furnished in respect of its business activities for the year of assessment ended 31
December 2023.
Sales 3 300 000
Cost of sales (900 000)
Gross Profit 2 400 000
Less Expenses
Bad and Doubtful Debts 120 000
Research and Experiments 190 000
Motor vehicle repairs and Maintenance 150 000
Depreciation 110 000
Travelling Expenses 60 000
Import Duty on New Machinery 20 000
Audit Fees 12 000
Income Tax Advice 16 000

Zesa Connection Fees 28 000
Interest on loan to construct factory 52 000
Donations 300 000
General expenses 520 000
Proposed Dividends 90 000 (1 668 000)
Operating Profit 732 000
Additional Information:
1. Bad and doubtful debts are made up of the following:
Bad debts proved to be irrecoverable $90 000
Provision for doubtful debts based on 10% of debtors $30 000
Total $120 000
2. 50% of the research and experiments relate to expenditure on equipment acquired at the
beginning of the year for purposes of the research and experiments..
3. Travelling Expenses
Business Trip $40 000
Private expenses for the wife of the Managing Director $20 000
Total $60 000
4. Donations include:
Manufacturers Association $60 000
Charitable $40 000
University of Zimbabwe $200 000
Total $300 000
5. General Expenses:
Telephone expenses $80 000
Fire Insurance $20 000
Fuels and Electricity $420 000
Total $520 000

6. The company assets and their Income Tax Values (ITVs) at the beginning of 2022 were as
follows:
Cost ITV
Motor Vehicles (Trucks) $200000 100000
Furniture & Fittings $100000 40000
Tractors $120000 60000
Plant & Machinery $240000 130000
Factory Building $1200000 900000
The company had claimed SIA on trucks and Tractors during the year ended 31 December
2021. No Special Initial Allowance (SIA) was claimed on the other assets in previous years.
Additions to assets during the year were as follows:
Machinery $200000
2 Tonne Truck (second hand) $20000
New Office furniture $40000
Extension to factory building $12000
Required
A Computation of the company’s minimum taxable income or maximum assessed loss for the
year ended 31 December 2023 including any tax payable if any (30 Marks).
QUESTION 3
(a) On 1st March 2023, Mr. Bones sold his Principal Private Residence(PPR) for $120 000. He had
purchased the house on 2nd July 2020 for $40 000. Selling expenses amounted to $1000. The
estate agents who facilitated the sale withheld 15% withholding tax. On 30 September 2020,
he constructed a swimming pool at a cost of $5000 and on 1 st January 2021 had a double
garage erected at a cost of $10 000. In February 2021 he built a driveway at a cost of $5000.
His income tax dossier shows that an amount of $20 000 had been rolled over from the sale
of an old PPR in May 2020.
Required
Calculate the Capital Gains Tax Payable or refundable. (10 Marks)

(b) If Mr. Bones immediately used some of his proceeds from the disposal of his PPR to acquire
another PPR for $80 000 in April 2023. Calculate the amount of the Capital Gain to be rolled
over assuming that Mr Bones makes an election in terms of section 21(2) of the Capital Gains
Tax Act for roll over (5 marks).

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FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING & AUDITING

The Assessed Carrying Capacity of the Land (ACCL) is 300.

Sales 3 300 000

Cost of sales (900 000)

Gross Profit 2 400 000

Bad and Doubtful Debts 120 000

Research and Experiments 190 000

Motor vehicle repairs and Maintenance 150 000

Depreciation 110 000

Travelling Expenses 60 000

Import Duty on New Machinery 20 000

Audit Fees 12 000

Income Tax Advice 16 000

Interest on loan to construct factory 52 000

Donations 300 000

General expenses 520 000

Proposed Dividends 90 000 (1 668 000)

Operating Profit 732 000

1. Bad and doubtful debts are made up of the following:

Bad debts proved to be irrecoverable $90 000

Provision for doubtful debts based on 10% of debtors $30 000

Total $120 000

Business Trip $40 000

Total $60 000

Manufacturers Association $60 000

Charitable $40 000

University of Zimbabwe $200 000

Total $300 000

Telephone expenses $80 000

Fire Insurance $20 000

Fuels and Electricity $420 000

Total $520 000

Motor Vehicles (Trucks) $200000 100000

Furniture & Fittings $100000 40000

Tractors $120000 60000

Plant & Machinery $240000 130000

Factory Building $1200000 900000

Additions to assets during the year were as follows:

2 Tonne Truck (second hand) $20000

New Office furniture $40000

Extension to factory building $12000

Calculate the Capital Gains Tax Payable or refundable. (10 Marks)

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