Plant and Machinery

Model answers

AAT Accounting Qualification
NVQ/SVQ in Accounting
Level 4
Preparing Business Taxation
Computations –Botswana
(BTC-B)
2003 Standards / AAT Accounting Qualification
Diploma pathway
Diploma level
Preparing Business Taxation
Computations –Botswana (BTC-B)
2003 Standards

June 2009

Note:

The model answers may, in parts, be longer than would be expected of candidates in the exam. The fuller version is given for teaching purposes.

Section 1

Task 1.1

Plant & machinery / Motor vehicles (business) / Motor vehicle
(45% private) / Total allowances
Cost / WDV / Cost / WDV / Cost / WDV
P / P / P / P / P / P / P
Brought forward / 621,360 / 341,748 / 310,000 / 107,500 / - / -
Disposals / (145,200) / (101,640) / (82,500) / (20,625) / - / -
Additions / 97,500 / 97,500 / 110,000 / 110,000 / 175,000 / 175,000
573,660 / 337,608 / 337,500 / 196,875 / 175,000 / 175,000
Allowances / 86,049 / 84,375 / 43,750 / 214,174
Private use / - / - / (19 688) / (19 688)
Adjusted allowances / 86,049 / 84,375 / 24,063 / 194,487
WDV c/f / 251,559 / 112,500 / 131,250

Task 1.2

Plant and machinery

Disposal value 103 000

WDV (101 640)

Balancing charge 1 360

Motor van

Disposal value 15 750

WDV (20 625)

Balancing allowance (4875)

Net balancing allowance(3515)

Task 1.3

Adjusted profits361 450

Capital allowances (task 1.1) (194 487)

Balancing allowances (task 1.2) (3 515)

Taxable profits163 448

Task 1.4

First P120,000 at varying rates10,875

P43 448 at 25%10 862

21 737

Task 1.5

30 September 2009

Task 1.6

Within 30 days of the date of issue of the assessment

Task 1.7

From:
To:
Sent: 16 June 2009
Subject: Tax advice
I am happy to provide you with details of tax relief that will be available to you if you acquire the new building.
Given the nature of your business, the building will be classified as a commercial building and as such you will be entitled to annual capital allowances calculated on the cost of the building, excluding land, at the rate of 2.5% per annum. The allowance is granted from the year in which the building is put into use and is not pro-rated if the period of use in that year is less than one year. Based on the figures provided, the annual allowance will be P21,250 calculated as follows:
(P1,200,000 – P350,000) x 2.5% = P21,250.
I hope this information helps.
Regards
AAT student

Section 2 Task 2.1

Initial allowance(P1,850,000 – 350,000 x 25%)P375,000

Annual allowance(P1850 000 – 350,000 x 2.5%)P 37,500

TotalP412,500

Task 2.2

Net profit5,868,445

Add:

Depreciation235,010

Speeding fines750

Donation11,350

Political donation30,000

Bad debts general provision21,000298,110

6,166,555

Less:

Local dividend (10,000)

Capital allowances (276,400)

IBA (task 2.1) (412,500) (698,900)

Adjusted profits5,467,655

Task 2.3

5% manufacturing basic tax273,382

Additional company tax (ACT) b/f350,000

ACT utilised(350,000)

Balance of ACT b/f0

Dividend withholding tax paid(280,000)

(630,000 – 350,000)

10% additional company tax (current)546,765

Additional company tax (current charge)266,765

Tax payable540,147

Additional company tax c/f266,765

Task 2.4

(a)

1st31 July 2008108,029.40

2nd31 October 2008108,029.40

3rd31 January 2009108,029.40

4th30 April 2009108,029.40

Final31 August 2009108,029.40

(b)

The rate is 1.5% per month or part of the month the payment is late.

(c)

The return is due for submission on or before 31 August 2009.

Task 2.5

Selling price410 000

Cost (105000)

Indexation allowance (1,128.2 - 611.0)/611.0x105000(88881)

Chargeable gain216 119

Task 2.6

From:
To:
Sent: 16 June 2008
Subject: Disposal of shares
I am happy to advise you on how the tax on the disposal gain will be calculated.
From the information you have provided, my opinion is that the shares were held for investment purposes. As such the proceeds derived from their disposal will be considered to be capital in nature for tax purposes. The amount of the gain subject to tax will be arrived at by deducting the cost and any selling expenses from the selling price to arrive at the profit on disposal. A further statutory deduction in lieu of indexation which is equivalent to 25% of the profit on disposal is allowed. The resultant figure is the chargeable gain subject to income tax at the company tax rate of 25% (15% basic and 10% additional company tax).
I hope this answers your query.
Regards
AAT student