Question 1Augustine was made redundant from his employment on 15 March 2020. He is a motor carenthusiast, and so decided to take this opportunity to indulge his hobby.On 1 April 2020, Augustine took out a bank loan of Rs 750,000 at an annual interest rate of 10%,rented a workshop for twelve months at a rent of Rs 4,000 month, and purchased high precisionequipment at a cost of Rs 235,000.On 10 April 2020, Augustine purchased four dilapidated motor cars for Rs 80,000 each. Therestoration of the four motor cars was completed on 10 May 2020 at a cost of Rs 120,000 permotor car. Augustine immediately sold all the motor cars for a total of Rs 2,000,000.Augustine was then offered employment elsewhere in the country commencing on 1 July 2020.He therefore sold the equipment for Rs 150,000 on 20 June 2020, repaid the bank loan on 30June 2020.As he has been indulging his hobby, Augustine believes that the disposal of the motor carsduring the year ended 30 June 2020 should be exempt from tax. He had no other income duringthat fiscal year ending June 2020 and is entitled to deductions in respect of 3 dependents. Required:Calculate Augustine's income tax liability for the year ended 30 June 2020, if he is treated ascarrying on a trade in respect of his motor car activities.

Tax liabilityThe amount of money paid by the government on the income or gains earned by a company…

Answered: Required: Calculate Augustine's income…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required: Calculate Augustine's income tax liability for the year ended 30 June 2020, if he is treated as carrying on a trade in respect of his motor car activities.