Reference no: EM132762978

Bakey Cakey (Pty) Ltd (hereafter "BC") are a bakery situated in the heart of Windhoek's CBD. They specialize in the baking of freshly baked homemade goods. The company has a 31 December year end. The accounting profit before tax for the financial year ended 31 December 2020 is N$500 000. Included in the accounting profit before tax are dividends received of N$10 000 and a penalty of N$15 000 for the late submission of VAT returns. BC raised a provision for current tax payable of N$121 000 for the financial year ended 31 December 2019. BC realized that they had under-provided for current tax in the previous year when the final assessment issued by the Tax authorities on 30 April 2020 (relating to FY 2019), reflected income tax payable of N$126 000. The company acquired a new industrial oven on 1 July 2019 for N$300 000 which has a four year useful life and a N$nil residual value. In terms of the Income Tax Act, an allowance of 40% is granted in the first year, with 20% granted per year for the subsequent three years, not apportioned for part of a year. A local school placed a bulk order with BC (Pty) Ltd for the supply of various pies, hotdogs, curry bunnies etc for the Gr 8 "sot" concert held as part of the school re- opening events scheduled for the third week of January 2021. Due to the school administrator going on extended leave, she decided to pay the full amount of N$21 000 on placement of the order. BC agreed to deliver the lemonade one day before the scheduled event in January 2021. There are no other temporary differences. The current tax rate is 28% (2019: 28%).

Problem 1: Calculate the Deferred Tax balance as at 31 December 2020.

Problem 2: Prepare the tax rate reconciliation of BC (Pty) Ltd for 31 December 2020. You only need to reconcile the amounts. Do not prepare the reconciliation in percentages (%'s).

Problem 3: Calculate the Current tax payable of BC (Pty) Ltd as at 31 December 2020