You are required to assist management with the income tax
disclosures in the financial report. The accountant prepared the
following notes for you:
• The outstanding balance owed to SARS for current taxation,
as reflected in the Statement of Financial Position as of 28
February 2025, amounts to R4 835. According to the final tax
assessment issued by SARS, the total income tax liability for
the year 2024 amounted to R10 155, payable by the
company.
• The income tax expense for the financial year 2025 is R14
350, whereas for the year 2024, it amounts to R9 725.
• The profit before taxation for the year ended 28 February
2025 is R56 000.
• The total payments made to SARS during 2025 amounted to
R13 750, covering obligations for both the current and prior
years of assessment.
• During the 2025 year of assessment, dividend income of R13
200 was received from local companies.
• The total dividends declared during 2025 amounted to R7
550, subject to a dividend tax rate of 20%, in accordance with
applicable tax regulations.
• A capital profit of R12 900 was realized from the sale of
specialised machinery during 2025. This profit, which
constitutes a capital gain as defined in accordance with the
SARS instruction notes. No assessed capital loss was carried
forward. The capital inclusion rate for 2024 is 80%, which has
remained unchanged from the previous year.
• The income tax rate for 2025 is set at 27% on taxable profits
and has remained unchanged for the past four years.
Required:
2.1 Prepare the general journals for the financial years ended 28
February 2024 and 28 February 2025
(10 Marks)
2.2 Prepare the income tax expense note in the financial
statements for the year of assessment ended 28 February 2025.
(10 Marks)
2.3 Prepare the extract of the Statement of Financial Position for
the year ended 28 February 2025.
(5 Marks)