TUTORIAL 2

Question 1

Modern Interior Sdn. Bhd., with paid-up capital of RM2 million, is in the business of interior design
since 2001. Its gross income from all business sources was RM1.75 million at the beginning of
financial year 2021. For the year ended 31 December 2021, the company’s Statement of Profit or
Loss showed the following:

BASIC period 1/1/21-31/12/21 YA2021

Notes RM RM
Sales 4,125,000
Less (1,270,000
: Cost of sales 1 )
2,855,000
Add 176,00
: Interests 2 0
220,00
Rental of a building in Singapore 0
130,00
Dividends 3 0 526,000
3,381,000
Less 590,00
: Remuneration cost 4 0
Provision for bad debts 5 2,400
Repairs and maintenance 6 97,000
Entertainment expenses 7 68,000
Professional charges and subscriptions 8 48,700
105,50
Research and development 9 0
275,00
Donations 10 0
Depreciation 31,000
100,00 (1,317,600
General and administrative expenses 11 0 )
Net profit before tax 2,063,400

Notes: RM

1 Cost of sales include:

Stock obsolescence written off 12,000
Gross payment for technical advice to a Swedish company made in June 27,000
2021. No withholding tax has been deducted (latepayment).

2 Interest comprises of: (no business income ) ( section 4 c)

Interest accrued on fixed deposit in Malaysia(taxable) 80,000
Interest on fixed deposit from a bank in Singapore 96,000
(remitted to Malaysia) (exempted)
3 Dividends comprise of: (need to put section4 c)
Dividend from Australia (remitted) (exempted) 78,000
Dividend received from a pioneer status company (exempted)) 52,000

4 Remuneration comprises of:

420,00
Salaries (RM200,000 to the directors and RM88,000 to employees) 0
EPF (directors and employees) 80,000
Annual leave passage to Krabi, Thailand for CEO and family (private
expenses) nd 90,000

5 Provision for bad debts comprise:

Specific provision 400
General provision 2,000

6 Repairs and maintenance include:

Cost of equipment purchased (RM60,000) and delivery cost (RM2,000) incurred 62,000
on purchase of equipment
Machine maintenance 11,000
Repairs on the building rented out in Singapore 24,000

7 Entertainment expenses comprise of:

Lucky draw prizes to customers 51,000
Clients’ entertainment 17,000

8 Professional charges and subscriptions include:

Legal fees for handling income tax appeal 900
Accounting and statutory audit fees 7,200
Staff recruitment charges paid to an employment agency 10,000
Fees paid for registration of trademark in Switzerland 15,000
Stamp duty on increase in authorised share capital 10,000
Designing and printing of brochures 5,600

9 Research and development include:

Approved training expense for employees to acquire 19,500
technical skills in the designing of office equipment
Research expenses incurred on a new project (approved) 86,000

1
0 Donations comprise:
125,00
Cash donations to Kedah Public Library 0
150,00
Cash donation to Majlis Bandaraya Melaka Bersejarah (MBMB) 0

1 General and administrative expenses comprise of:

 1
Allowance paid to one MMU student for 6 months internship program approved 4,200
by Talent Corp. Malaysia Bhd.
Compensation paid upon restrictive covenants 27,000
Lease rental of a motor vehicle licensed as commercial vehicle at RM3,000 36,000
per month (starting from 1 March 2019).
Construction of a showroom 32,800

Other information:

i. The current year and brought forward capital allowances amounted to RM65,000 and
RM9,800 respectively.
ii. Business loss brought forward from the Year of Assessment (YA) 2020 was RM29,000.

Required:

Calculate the income tax payable for Modern Interior Sdn. Bhd. for YA2021. Every item in the notes
to the statement must be included in your computation. Write ‘NIL’ where no adjustment is
necessary.

Question 2

Glamreka Sdn. Bhd. is a company engaged in the manufacturing and selling of cabinets with a paid-
up capital of RM3 million on 1 November 2020. It closes its accounts on 31 October annually and is a
tax resident in Malaysia.

NON-SME (flat TAX RATE= 24%) ,YA2021= 1/11/2020-31/10/2021)

Glamreka Sdn. Bhd.’s gross income from all business sources was RM1.5 million at the beginning of
financial year 2021. Its profit and loss account for the year ended 31 October 2021 is as follows:

Glamreka Sdn. Bhd.

Statement of Profit or Loss for the year ended 31 October 2021

Note RM RM
Sales 2,400,000
(1,600,000
Less: Cost of sales 1 )
Gross profit 800,000
Add: Dividend 2 96,000
Interest 3 5,000
Profit on sale on fixed assets 10,000 111,000

Less: Advertising and promotion D 15,000

Depreciation ND 80,000
Entertainment 4 35,000
Foreign exchange loss 5 18,000
Freight and insurance 6 22,500
Legal and professional charges 7 40,500
 Provision for doubtful debts 8 8,000
Subscriptions and donations 9 54,500
Research and development 10 50,000
Remuneration 11 240,000
Lease rental 12 21,600 (585,100)
Net profit before taxation 325,900

Notes: RM

1 Cost of sales includes:

Provision for stock obsolescence (out-of-date) ND 10,000
Damaged goods written off D NIL 8,500

2 Dividends were received from (X BUSINESS INCOME) S4©

Pioneer company in Malaysia (gross) exempted 36,000
Hong Kong (remitted) (gross) exempted (para 28 sch6) 20,040
Malaysian company (net) exempted 39,960

3 Interest: (business income- AR-customer-business) t nil

This represents charges on overdue trade accounts(AR) imposed by the company for
delayed payments BY customer

4 Entertainment:
This amount was incurred in providing food and drinks for a product launching
ceremony(100%D) except for RM10,000 which was incurred for the company's annual
dinner for its staff. (100%D)

5 Foreign exchange loss:

Realised loss incurred from purchase of machinery(capital)nd from China 10,000
Unrealised loss incurred from acquisition of raw materials from Indonesia ND 8,000

6 Freight and insurance charges:

Premium paid to Indonesian insurance company on imported goods D 12,000
Export credit premium paid to Malaysia Export Credit Insurance Bhd. DD 10,500

7 Legal and professional charges:

Audit fees 12,500
Income tax appeal 5,000
Registration of a new trademark in UK (dd) 15,000
Renewal of two existing trademarks in Malaysia 8,000

8 Provision for doubtful debts (trade):

Specific provision for doubtful debts 1,000
General provision for doubtful debts 3,000
Trade bad debts written off 4,000
 9 Subscriptions and donations:
Entrance fee to a golf club for CEO (business and private uses) nd 5,000
Entrance fee to a trade association 5,500
Annual subscription to a trade association 2,000
Cash donation to a political party 15,000
Cash donation to Rumah Seri Kenanga (approved institution) 27,000

10 Research & development expenses:

Routine product testing and quality control expenses 18,000
Research expenses incurred on an approved project 32,000

11 Remuneration:
Salaries and bonuses for employees 180,000
Salary and bonuses for disabled employee 14,000
EPF contribution for all employees 46,000

12 Lease rental:
A Toyota 1-tonne lorry which costed RM155,000 when new was leased at a monthly rate
of RM1,800 since November 2015. D commercial

Additional information:

Capital allowances for the current year and brought forward from previous year were RM33,000
and RM55,000 respectively.

The company has a brought forward business loss of RM37,500 from the Year of Assessment (YA)
2020.

Required:

Calculate the income tax payable by Glamreka Sdn Bhd for YA2019. Every item in the notes to the
account must be shown in your computation. Write “Nil” where no adjustment is necessary.