Question

Capri Investments Inc. is a company invented to revolutionalise the information technology sector in Namibia. The company was started in the late 2000’s as Namibia was catching up to the rest of the world in technology.Nangoo, Natumbisa & Ngajoo, incorporated the entity & owned 100% of the issued share capital in equal proportions. The company main primary business is the provision of IT support services to large parastal companies & government ministries. The company also provide IT training to these entities & any other private customers, be it individuals companies or individuals in their own personal capacities. In, addition to the above, the company sells software & hardware IT related products including non-branded laptops. The company has a 28 February year-end, assume that this also represents their tax year. Capri mainly imports their stock from India and China. PART A However, during the year, the company imported a machine from England which will industrialize their current manufacturing process. The cost of the machine was £20,300. The machine arrived in Windhoek on 01 May 2018. Assume that on this date the risks & rewards have transferred to Capri. The creditor will be paid in instalments of 50% each; the first instalment being due on 30 June 2018 and the 2nd instalment being due on 31 August 2018. During the financial year, Capri has also purchased 80 (i.e eighty) laptops from India for 120,645 Rupees (₹) This shipment arrived on 30 November 2018, when the risks and rewards were transferred. The creditor was paid on 20th of December 2018. The following exchange rates have been provided: N$ to 1 Pound (£) N$ to 1 Indian Rupee (₹) 30 June 2018 17.00 5.00 30 November 2018 16.50 5.50 20 December 2018 16.00 5.20 01 May 2018 17.50 4.80 31 August 2018 16.50 4.50 28 February 2019 18.00 4.90 PART B Considering the information above, Capri has also purchased the additional stock items: Capri had a total opening stock balance of N$ 45,600. Purchased 55 laptops from China at 85,000Yen (¥). Assume the exchange rate on the date risks and rewards transferred was N$ 8.80 for 1 Yen. Additional freight charges of N$ 25,700 were incurred as well as import duties of N$ 78,600 were incurred in order to get the stock to its current condition and location. During the current year of assessment, Capri received donated materials (i.e trading stock in relation to Capri) from a local materials wholesaler as it was old stock and they wanted to revamp their current shop. The Market value of the materials on the date of donation was N$ 22,240. At year-end Capri had a total closing inventory balance of N$ 25,900. Total sales for the period amounted to N$ 2,250 897.

YOU ARE REQUIRED TO:

PART B Required: i) Define trading stock in terms of the income tax act of Namibia?

ii) Calculate the gross profit for taxation purposes for Capri Investments Inc. (10 mar

Answer 1

Section A)

According to the Information organization imported a Machinery from England and it is shown up on first May 2018 at the expense of 20,300 Pound subsequently it will be recorded as follows in the books of the organization.

20,300 Pound *17.50 N (swapping scale ) = 3,55,250 N

Anyway lenders are paid in Install ments 50 % on 30 June and 50 % on 31 August 2018 respectivley.

Accordinly Ist Install ment paid sum = 20,300/2 * 17.00 Exhange Rate = 172550

@nd Installment paid amount= 20300/2*16.50 Exchange Rate=167475

Aggregate sum Paid in N 340025

Less unique expense of machine 355250

Net Gain of foriegn exhnage N 15225

Absolute expense of PC bought on 30 November henceforth comparable N

120645*5 = 6,03,225 N

Less:Payment made on 20 dec 2018 for the abovementioned

(120645*5.20) 6,27,354 N

Overal deficit on the foriegn Exchnage of N 24129 N

Net Foriegn Exhange Gain and (oss)on both exchange

(24129)- 15225= 8904 N Net Loss.