Question

Question 4

 Toys4All (Pty) ltd (“Toys4All or the company”) is a registered Value –Added Tax (VAT) vendor and has a two-month tax period. Toys4All operates as a wholesaler of toys that are supplied both local and foreign retailers.

The following income and expenditure amounts, inclusive of vat where applicable, have been generated for the tax period 1 Jan 2020 to 29 Feb 2020:

	R
INCOME
Local sales	1,524,900
Export sales	250,000
Interest on loan to a resident subsidiary company	3,450
Bad debts recovered (note1)	23,250
Insurance payout (note 2)	164,800
EXPENDITURE
Purchases of trading stock (note3)	455,400
Salaries	120,000
Petrol	6,500
Motor car repairs and maintenance	2,645
Motor car purchased (note 4)	240,000
Insurance (note5)	7,935
Bad debt written off (note 6)	7,880
Interest on overdraft	2,150
Bank charges	805
Rentals (note7)	5,750
Water and electricity	6,900

 

NOTES

1.       Two debtors that have been written off in previous tax periods were recovered by Toys4All during its current tax period.

·         R 17 250 was recovered from Kid Co (pty) ltd (a local retailer) relating to a sale made in April 2019, and

·         R6 000 was recovered from Coco Inc (an export debtor) relating to sales made in May 2019.

2.       Two indemnity awards were received from the company’s insurer during the current tax period:

·         R 105 000 was received for the loss of the managing director’s company car ( a motor car) which was stolen from outside his home in December 2019. It had a nil carrying amount in the accounting records in Toys4All when it was stolen.

·         R59 800 was received for a batch of trading stock that was stolen a delivery vehicle transporting goods to a local customer in Johannesburg (South Africa) was hijacked. The delivery vehicle belonged to a transport contractor used by it to transport its goods.

3.       All purchases are from registered VAT vendors.

4.       A new motor car was purchased by the company on 1 Feb 2020 to replace the managing director’s company car that stolen (note2). The motor car cost R240 000 (including VAT). The managing director has not yet been granted use of the car as he was on leave for the month of Feb 2020. It is currently being used for general purposes within the business.

5.       The insurance expense includes an amount of R850 relating to the insurance on the new motor car ( note4).

6.       The bad debt written off for R7 880 was for an amount owing by Humleys Plc (an export customer) for goods shipped to the company in London in June 2019. Toys4All has been unable to recover the debt since Hmleys Plc was liquidated.

7.       The rental is broken down as follows:

Rental of printers                                             4 600

Rental of water coolers for staff                1 150

 

Required:

Calculate the VAT payable by, or refundable to Toys4All (pty) ltd for its tax period 1 Jan 2020 to 29 Feb 2020. Where there are no VAT consequences, provide a brief reason why. A VAT rate of 15% applied throughout the applicable tax period on standard-rated good and services. (20 x 2 = 40 marks)