Question 3 (28 marks)
The following information has been provided for Samson Ltd, a construction organisation. The
financial year ended is 31 December 2021.
The statements of financial position and statement of profit or loss (before tax expenses) are shown
below.
| Samson Ltd | |
| Statement of profit or loss for the year ended 31 December 2021 | |
| Revenue | 2,402,000 |
| Cost of sales | 1,910,000 |
| Gross profit | 492,000 |
| Operating expenses | 400,000 |
| Profit from operations | 92,000 |
| Finance costs | 12,000 |
| Profit before tax | 80,000 |
| Samson Ltd | |
| Statement of financial position as at 31 December 2021 | |
| Non-current assets | |
| Property, plant and equipment | 550,000 |
| Current assets | |
| Inventories | 130,000 |
| Trade receivables | 350,000 |
| Cash and cash equivalents | 95,000 |
| 1,125,000 | |
| Equity | |
| Share capital | 500,000 |
| Retained earnings | 412,368 |
| Non-current liabilities | |
| Liability for product warranty costs | 8,000 |
| Deferred tax liability (from 2020) | 9,632 |
| Current liabilities: | |
| Trade payables | 195,000 |
| 1,125,000 |
Additional information:
i. The wear and tear allowance for the year ended 31 December 2021 is N$103 000.
Depreciation included in operating costs was N$85 000. The cost of the property, plant and
equipment was N$800 000. Accumulated wear and tear for tax purposes amounted to exactly
N$208 000 as at 1 January 2021.
| ii. | During 2021, the company increased the liability for product warranty costs by N$2 500. Product warranty costs are not tax deductible until the company pays claims. In 2021 claims paid amounted to N$3 100. Expenses for promotion included in operating expenses amounted to N$900. These are not deductible for tax purposes. Tax rate for 2021 was 30% (2020, 28%). |
| iii. | |
| iv. |
Required:
| (a) Calculate the current tax payable for the year ended 31 December 2021. (b) Disclose the income tax expense note for the year ended 31 December 2021. (c) Calculate the deferred tax balance for the year ended 31 December 2020. (d) Calculate the deferred tax balance for the year ended 31 December 2021. |
(8 marks) (9 marks) (5 marks) (2 marks) |
(e) Disclose the deferred tax note in the financial statements for the year ended 31 December 2021.
(4 marks)