Out the Box (Pty) Ltd (Out the Box) specialises in eco-friendly packaging solutions and is not asmall business corporation. The company's financial year ends on 31 December 2023. The financial director of Out the Box (Pty) Ltd has computed that the company's taxable income, before considering the items mentioned below, amounted to R800 000. This figure has been duly verified for accuracy. 1) On 1 February 2023, Out the Box entered into a lease contract to house its offices in the bustling city. The lease was for a period of five years, with the option to extend the contract for another five years. In terms of the contract, Out the Box had to effect improvements on the premises to the value of R300 000. The building improvements, which commenced on1 April 2023, were completed and brought into use on 31 July 2023. ThE total cost of theimprovements was R360 000.2) A second-hand manufacturing machine was purchased and brought into use on1 March 2023 for R182 000. The machine was moved to the new factory building inRichards Bay (see note 4 below) on 15 October 2023 at a cost of R22 900.3) Out the Box purchased a new manufacturing machine on 3 January 2019 at a cost ofR156 000.4) On 1 September 2023, the company purchased a new factory building in Richards Bay at acost of R2 200 000. The purchase price included R500 000 in respect of the land on whichthe factory was located. The factory was brought into use on the date of acquisition.5) The company purchased one mainframe computer on 1 October 2023 for R125 000. Thecompany also incurred a R15 000 fee for installing the computer. A second-hand laptop waspurchased on the same date to be used in the reception area, at a cost of R6 800.6) On 1 November 2023, Out the Box purchased a new delivery vehicle for R195 000. Thevehicle was brought into use on the same day. Insurance costs for the 2 months ending31 December 2023 amounted to R6 400.7) Out the Box purchased office equipment for R75 000 on 01 January 2021 and brought itinto use at that date. On 31 December 2023, the equipment was sold for R15 000. Wear-and-tear allowances of R18 750 per annum were claimed from 2021 to 2023. The wear andtear on the equipment in the current year was taken into account in determining thetaxable income above.8) On 31 December 2023, Out the Box sold furniture for R30 000 that had originally costR68 000 when purchased in 2020. The furniture had a carrying amount of R16 200 and a taxvalue of R12 750 on the date of its sale.SARS allows a four-year write-off period in respect of all assets, where applicable. Required:Q.5.1 Determine the taxable income of Out the Box (Pty) Ltd for its year of assessmentended 31 December 2023, after taking into account the above information.• Round your final answers to the nearest Rand.• Provide brief reasons for any nil effects.• Ignore VAT and CGT.
Out the Box (Pty) Ltd (Out the Box) specialises in eco-friendly packaging solutions and is not a
small business corporation. The company's financial year ends on 31 December 2023. The financial director of Out the Box (Pty) Ltd has computed that the company's taxable income, before considering the items mentioned below, amounted to R800 000. This figure has been duly verified for accuracy.
1) On 1 February 2023, Out the Box entered into a lease contract to house its offices in the bustling city. The lease was for a period of five years, with the option to extend the contract for another five years. In terms of the contract, Out the Box had to effect improvements on the premises to the value of R300 000. The building improvements, which commenced on1 April 2023, were completed and brought into use on 31 July 2023. ThE total cost of theimprovements was R360 000.
2) A second-hand manufacturing machine was purchased and brought into use on
1 March 2023 for R182 000. The machine was moved to the new factory building in
Richards Bay (see note 4 below) on 15 October 2023 at a cost of R22 900.
3) Out the Box purchased a new manufacturing machine on 3 January 2019 at a cost of
R156 000.
4) On 1 September 2023, the company purchased a new factory building in Richards Bay at a
cost of R2 200 000. The purchase price included R500 000 in respect of the land on which
the factory was located. The factory was brought into use on the date of acquisition.
5) The company purchased one mainframe computer on 1 October 2023 for R125 000. The
company also incurred a R15 000 fee for installing the computer. A second-hand laptop was
purchased on the same date to be used in the reception area, at a cost of R6 800.
6) On 1 November 2023, Out the Box purchased a new delivery vehicle for R195 000. The
vehicle was brought into use on the same day. Insurance costs for the 2 months ending
31 December 2023 amounted to R6 400.
7) Out the Box purchased office equipment for R75 000 on 01 January 2021 and brought it
into use at that date. On 31 December 2023, the equipment was sold for R15 000. Wear-
and-tear allowances of R18 750 per annum were claimed from 2021 to 2023. The wear and
tear on the equipment in the current year was taken into account in determining the
taxable income above.
8) On 31 December 2023, Out the Box sold furniture for R30 000 that had originally cost
R68 000 when purchased in 2020. The furniture had a carrying amount of R16 200 and a tax
value of R12 750 on the date of its sale.
SARS allows a four-year write-off period in respect of all assets, where applicable.
Required:
Q.5.1 Determine the taxable income of Out the Box (Pty) Ltd for its year of assessment
ended 31 December 2023, after taking into account the above information.
• Round your final answers to the nearest Rand.
• Provide brief reasons for any nil effects.
• Ignore VAT and CGT.
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