Certified Accounting Technician Examination Advanced Level Paper T9 (SGP) Preparing Taxation Computations (Singapore)

SAA Global Education Mock Examination May 2010

Time allowed Reading and planning Writing 15 minutes 3 hours

This paper comprises TWO Sections. Section A (Total 20 marks) 10 Multiple choice questions (MCQ) 2 marks each ALL questions are COMPULSORY. Section B (Total 80 marks) ALL FOUR questions are COMPULSORY and MUST be answered Tax rates and allowances are attached.

In the actual examination, during reading and planning time, only question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor.

Should any part of this paper be reproduced, the writer should be informed in writing, as a matter of courtesy. Neither the writer nor SAA GE accepts any responsibility for any loss to any person as a result of the material in this paper. SAA GE and the writer bear no responsibility for the contents of the paper, which is written for a particular course.

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TAX RATES, RELIEFS AND REBATES The following Tax Table is to be used in answering the questions Selected reliefs/ rebates for Year of Assessment 2010 Normal (max) $1,000 $3,000 $4,000 Handicapped (max) $2,000 $5,000 $6,000 $2,000 (max) Wife relief Normal Parent relief - Parents stay with taxpayer - Parents do not stay with taxpayer $5,000 $3,500 Handicapped $8,000 $6,500 $3,000 Grandparent Caregiver Relief (GCR)

Earned Income Below 55 years 55 59 years old 60 years and above

Foreign maid levy

$6,360 (max)

Voluntary CPF contributions made by self-employed persons Capped at $26,393 or 34.5% of s10(1)(a) assessable income whichever is lower. Life insurance Qualifying Child Relief (per child) Handicapped Child Relief (per child) Working Mother Child Relief (WMCR) 1st child 2nd child 3rd child and subsequent child Maximum WMCR Maximum relief per child
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$5,000 (max) $4,000 $5,500 (% of mothers earned income) 15% 20% 25% 100% $50,000
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TAXRATES, RELIEFS AND REBATES Coursefees Nsman Active Nsman Non-active Nsman Wife/widow

$3,500 (max)

$3,000 $1,500 $750

Central Provident Fund (CPF) Contribution for individual below the age of 50 years and earning more than $1,500 Employee Employer Rate of CPF contributions 20% 14.5% Maximum annual ordinary wages (OW) attracting CPF Maximum annual additional wages (AW) attracting CPF PERSONAL TAX RATES PART A Chargeable Income S$ 20,000 10,000 30,000 10,000 40,000 40,000 80,000 80,000 160,000 160,000 320,000 320,000 Tax rate % 3.5 Tax S$ 0.00 350.00 350.00 550.00 900.00 3,400.00 4,300.00 11,200.00 15,500.00 27,200.00 42,700.00 20 $54,000 $76,500 less OW subject to CPF

On the first On the next On the first On the next On the first On the next On the first On the next On the first On the next On the first On the income above

5.5

8.5

14

17

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TAX RATES, RELIEFS AND REBATES Corporate income tax rate Year of Assessment 2010 Partial tax exemption 1st $10,000 of chargeable income 75% exempt Next $290,000 of chargeable income 50% exempt

17%

$7,500 $145,000 $152,500

Full tax exemption for new start-up company 1st $100,000 of chargeable income 100% exempt Next $200,000 of chargeable income 50% exempt

$100,000 $100,000 $200,000

Goods and services tax Standard rate Registration threshold 7% $1 million

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Section A All TEN questions are compulsory and MUST be attempted. Each question is worth 2 marks. 1. Mr Chan received a Notice of Assessment for Year of Assessment 2010 from the Comptroller of Income Tax (CIT). The notice was issued on 30 April 2010 indicating tax payable of $5,000. He is not agreeable to the assessment. What is his course of action? I II III IV A. B. C. D. Lodge an objection with the CIT in writing within 30 days from 30 April 2010 State the grounds of objection Settle the tax payable within 1 month from 30 April 2010 Settle the tax payable upon final agreement of the assessment with the CIT I I and II I, II and III I, II and IV

2. Paul Andrew, an American worked in Singapore from March to December 2009. He He was paid the following remuneration. Salary - $10,000 per month Bonus - $30,000 He was reimbursed with car expenses of $1,800 from March to December 2009. He travelled 10,000 km in total and approximately 3,000 km was for personal travelling, the remaining was to attend to companys official matters. What is Pauls employment income assessable to tax in YA 2010? A. B. C. D. $130,000 $120,540 $130,540 $131,800

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3. Amelia is a widow and has two children (twin) both are 12 years old. Her income during the year 2009 is as follows: Salary and bonus - $90,000 Free lance consultancy fee - $10,000 Rental income - $20,000 Compute the total child relief available to her for the Year of Assessment 2010. A. B. C. D. $38,000 $43,000 $48,000 $35,000

4. Sophia is the sole proprietor of a beauty salon. Her business income earned during the year 2009 was $60,000. She made voluntary CPF contribution of $26,000 and compulsory CPF contribution of $4,000 during the year 2009. What is the amount of CPF relief claimable for YA 2010? A. B. C. D. $30,000 $20,700 $26,393 $4,000

5. Jonathan is an Australian and will be terminating his employment with Cambell Pte Ltd on 31 December 2010. He will be leaving Singapore on 15 January 2011 back to Australia. His annual employment income for the year 2010 will be $150,000. By which date must Cambell Pte Ltd notify the Comptroller of Income Tax of the cessation of employment of Jonathan? A. B. C. D. 15 December 2010 31 January 2011 30 November 2010 15 January 2011

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6. Marqi Pte Ltd carries on the business of manufacturing of furniture. The company purchased a piece of freehold land to construct a factory. The construction cost of the factory is as follows: Cost of land Legal fee and stamp duty on purchase of land Architect fee Piling work Electrical engineer fee Construction cost Interest on loan taken to finance construction Air- Conditioners Fencing, road, drainage Usage of the building: Office Showroom Factory $500,000 10,000 100,000 50,000 100,000 1,000,000 20,000 50,000 10,000

5% 15% 80%

Compute the qualifying cost for purpose of industrial building allowance claim. A. B. C. D. $1,048,000 $1,260,000 $1,310,000 $1,008,000

7. Compact Pte Ltd has unabsorbed capital allowance brought forward from Year of Assessment (YA) 2009 to be utilised against its adjusted profit in YA 2010. The companys financial year end is 31 March. State the relevant comparison dates for purposes of the shareholder test in considering whether the company could utilise the brought forward capital allowance. A. B. C. D. 31 March 2008 and 1 Jan 2009 31 December 2008 and 1 Jan 2010 31 December 2009 and 1 Jan 2010 31 December 2009 and 1 Jan 2009

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8. Which of the following statement(s) is/are true for carry back relief to be available in respect of trade losses for YA 2010? I II III IV Must satisfy the substantial shareholders test on the relevant dates Must satisfy the same trade test Subject to maximum claim of $200,000 Can be carried back up to a maximum of 5 immediate preceding years of assessment. I and III I, II and III I, III and IV I, II and IV

A. B. C. D.

9. Island Pte Ltds financial year end is 31 March. State the respective deadlines for the submission of estimated chargeable income and the filing of tax return to the Comptroller of Income Tax for the Year of Assessment 2010. A. B. C. D. 30 June 2010 and 31 December 2010 30 June 2010 and 30 November 2010 30 June 2009 and 30 November 2010 30 June 2009 and 30 October 2010

10. State the time of supply for GST purpose in respect of the following transaction: Customer placed order -30 June 2009 Goods delivered to customer - 3 July 2009 Tax invoice issued to customer -10 July 2009 Payment received from customer -28 July 2009 A. B. C. D. 30 June 2009 3 July 2009 10 July 2009 28 July 2009 (20 marks)

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Section B (80 Marks) All FOUR questions are compulsory and must be attempted. 1. Jeremy Goh worked as a marketing manager in a MNC earning salary of $5,000 per month. He was retrenched on 1 March 2009 and was paid retrenchment benefit of $60,000 to compensate him for loss of employment. After his retrenchment, he set up a cafeteria (sole proprietorship) in a shopping mall. He incurred capital allowance of $5,000 and loss of $30,000 from the cafeteria business. His wife, Janice Goh works in an advertising company. Janice owns a condominium apartment in her own name and rented out the apartment in 2009. Other details relating to their income and expenditure in 2009 are as follow: Jeremy(S$) 5,000 500 500 2,000 Janice(S$) 120,000 5,000 (2,000) 15,300 5,000

Annual salary and bonus Monthly salary Interest from approved bank One-tier dividend Cash donation to NKF* Rental loss CPF contribution (statutory) Life insurance premium

*NKF is an institute of public character Other information: 1. Jeremy was born in 1965 and Janice in 1969. They have 2 children Jolin and Jena. Jolin was born in 1998 while Jena was born blind in year 2000. All of them are Singapore citizens. 2. Jeremy is an inactive reservist and he is not a key command and staff appointment holder. 3. Jeremys mother is 68 years old, living with the family and she helps to take care of her grandchildren. She only derived interest income of $1,000 in the year 2009. 4. The family employed two foreign maids. Salary and maid levy for each maid was $350 and $170 per month respectively. These payments were made by Jeremy. Required: Determine the tax liability of Jeremy and Janice for Year of Assessment (YA) 2010. All available reliefs and deductions should be claimed in a manner that would minimise their tax liabilities for YA 2010. Show all workings in detail. (25marks)

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2. Toyago Pte Ltd, a manufacturer of plastic molds has been incorporated since December 2007. It makes up its accounts to 30 September annually. Results for the financial year ended 30 September 2009 are as follows : Note 1 S$ 4,273,900 75,000 114,000 51,000

Gross profit Dividend income (one tier) Insurance claim Interest income (received on 30.7.09 on a 6mth fixed deposit) Less : Staff remuneration Staff benefits Travelling and transport Utilities Interest for working capital Foreign exchange loss Repairs and maintenance Advertising and promotion Bad and doubtful debts Depreciation of fixed assets Legal and professional fees Miscellaneous Net Loss

4,513,900 2 3 4 2,600,000 130,000 219,000 5,000 3,000 70,000 80,000 215,000 30,000 1,377,900 230,000 57,000 (503,000) =========

5 6 7 8 9 10

Note :
1.

Gross profit Gross profit is arrived at after making the following stock obsolescence provisions: - General provision S$50,000 (20,000) - Specific provision write back Gross profit also includes salaries for factory supervisors 100,000

2.

Staff remuneration Staff salaries and wages Commission Cash allowance in lieu of medical expenses Bonus CPF (statutory) Directors fee

S$1,000,000 500,000 20,000 400,000 400,000 280,000 2,600,000

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3.

Staff benefits Staff medical expenses [implemented TMS / PMS] Accommodation for staff Staff outings Annual dinner and dance Interest cost on interest-free loans to staff Beverages for pantry

S$40,000 45,000 13,000 23,000 7,000 2,000 130,000

4. Travelling and transport Local transport (reimbursement of MRT and taxi fare) Overseas business travel Motor van expenses : GH 1122 H Rental of cars for rep office in Vietnam Reimbursements to staff for their private car expenses incurred for business purpose Rental of cars in Singapore

S$30,000 120,000 15,000 20,000 4,000 30,000 ----------219,000

5.

Foreign exchange difference Realised exchange gains on sales of machinery Realised exchange loss on settlement of trade debts Exchange loss on year end revaluation of fixed assets denominated in foreign currencies

(S$10,000) 6,000

74,000 70,000

6.

Repairs and maintenance Repainting of office Replacement of windows Installation of machinery General cleaning Repairs and maintenance of machinery

S$20,000 16,000 21,000 5,000 18,000 80,000

7.

Advertising and promotion Advertisement and free samples for customers

S$215,000

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8.

Bad and doubtful debts Trade debts written off Loans to employees written off General provision for trade debts Specific provision for trade debts Bad debts (non-trade) recovered

S$20,000 5,000 12,000 6,000 (13,000) 30,000

9.

Legal and Professional fees Legal fee for registration of patent Legal fee for renewal of trademark Audit and secretarial fee Legal fee for renewal of tenancy agreement

90,000 100,000 35,000 5,000 230,000

10.

Miscellaneous Penalty for late CPF payment Gifts to customers Cash donations: NKF # 13.10.08 Salvation Army # 14.2.09 Non-cash donation: NKF# (donation of beds) 14.8.09 Traffic fines Subscription to corporate club membership Entrance fee for corporate club membership

2,000 3,000 5,000 10,000

2,000 17,000 1,000 4,000 30,000 57,000

# denotes approved institutions of public character. 11. Capital allowance brought forward from YA 2009 agreed with the Comptroller of Income Tax is $200,000. The trade and shareholders of the company have remained the same since 2001. Capital allowance for YA 2010 in respect of plant and machinery as stated in the balance sheet has been computed at $540,334. 12. The company met the qualifying conditions for the full tax exemption scheme for newly incorporated companies for YA 2010. Required : Calculate the minimum tax liability of Toyago Pte Ltd for YA 2010. Show all detailed workings. (27 marks)

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3.Fairplay Pte Ltd is in the business of manufacturing of educational toys. It is in the process of constructing a factory at Tuas. It adopts a 31 December financial year end. The company incurred the following capital expenditure in the financial year 2009: Factory building Construction cost (The factory is expected to be completed in 2011) Motor vehicle SDF 2022G Van Furniture and Equipment Computer (Hire purchase note 1) Fax machine Office furniture : -less than $1,000 each -more than $1,000 each Demountable partition Existing Assets Fixed Assets

$500,000

130,000 120,000

50,000 3,000 2,000 6,000 2,000

Cost $ 12,000 60,000

Air conditioner Van (Disposed on 1 July 2009)

Tax written down value $ 3,000 8,000

Remaining life 1 1

Sales Proceed $ N.A 10,000

Note 1 Computer under Hire Purchase Cash price Less: Deposit Hire purchase interest Payable by 10 monthly instalments starting from 1 Sept 2009 at $4,700 per instalment Required:

$50,000 (5,000) 45,000 2,000 $47,000

Calculate the maximum capital allowances and any balancing adjustment for Year of Assessment 2010. (14 marks)

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4 (a) Tanny Pte Ltd is a goods and services tax (GST) registered trader. For the quarter ended 31 December 2009, the company reflected the following in its Profits and Loss account: Sales to local customers Sales to overseas customers Purchase of stocks Staff salaries Rental of office Purchase of office equipment Purchase of office supplies Motor car expenses for sales manager $300,000 100,000 200,000 80,000 15,000 9,000 1,000 500

All of the above, except the purchase of office supplies, were purchased from GST registered suppliers. All of the above amounts are excluding GST. Required: Calculate the amount of GST payable/receivable by the company for the quarter ended 31 December 2009. (8 marks)

4(b) April Pte Ltd incurred trade loss of $300,000 and capital allowance of $100,000 for the Year of Assessment (YA) 2010. It derived the following assessable income in the YA 2008 and 2009: Assessable income for YA 2008 - $70,000 Assessable income for YA 2009 - $150,000 The company would like to elect for carry back relief in YA 2010. Required: Compute the companys assessable income in all the relevant year of assessment indicating any amount available for carry forward. (6 marks)

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