Reference no: EM132723918
Livestock and produce: Ring-fencing provision
A farmer had the following livestock on hand at the beginning of the year of assessment.
R
10 bulls at standard value R50 each 500
25 oxen at standard value R40 each 1 000
1 200 cows at standard value R40 each 48 000
600 tollies and heifers at standard value R30 each 18 000
140 calves at standard value R4 each 560
Total=68 060
He bought a further 300 cows during the year at a cost of R220 000. He derived an income from farming operations (before the deduction of any expenditure) of R550 000 during the year. He had the following livestock on hand at the end of the year of assessment:
9 bulls at standard value R50 each 450
23 oxen at standard value R40 each 920
1 400 cows at standard value R40 each 56 000
500 tollies and heifers at standard value R30 each 15 000
220 calves at standard value R4 each 880
Total = 73 250
- All the livestock bought during the year was still on hand at the end of the year. The market value of the livestock on hand at the end of the year of assessment was R1 million.
Problem 1: Calculate the deduction that will be allowed for the cows bought during the year of assessment.