Illustration Question:

McMickey is a Fast Food Production Ltd. The operating results of McMickey for the year ended
March 31, 2020 are as follows:

Notes HK$ HK$

Income
Sales 1,536,890.00
Profits from disposal of fixed assets 50,000.00
Dividend income 8,500.00
Interest income 1 12,200.00
1,607,590.00
Expenses
Salaries and allowances 750,000.00
Office rent and rates 500,000.00
Retirement and provident fund 2 178,500.00
Depreciation 25,000.00
Bank charge and interest 3 9,900.00

Legal and professional fees 4 6,500.00

Donations 5 50,000.00
Foreign tax paid 6 5,000.00
Penalty 7 1,500.00
General expense (allowable) 95,000.00
1,621,400.00
Net Loss for the Year -13,810.00

Explanatory Notes:

1 Interest on $EURO fixed deposit with a bank in Hong Kong 5,500.00

Interest on $HK fixed deposit with a bank in Hong Kong 3,000.00
Interest received from a customer for an overdue account receivables account 3,700.00
12,200.00

Provision for annual contribution to MPF (Hong Kong, 30% of total

2 123,500.00
employee emolument)
Provision for special contribution (Hong Kong, made to a retirement scheme
55,000.00
other than a Recognized Occupational Retirement Scheme)
178,500.00

3 Bank charges on daily transactions 2,300.00

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 Interest for money borrowed from an overseas associate company to finance
7,000.00
purchase of a manufacturing machine
Hire purchase charge on computer used 600.00
9,900.00

4 Legal fee for overdue trade debt collection 1,500.00

Legal fee for staff loan collection 1,400.00
Auditing and tax service fee 1,600.00
Legal fee paid for initial lease of new office 2,000.00
6,500.00

5 Donation to Red Cross (an approved charity) 50,000.00

6 Foreign profits tax paid 2,000.00

Export tax to the US Government for export products sold in the US 3,000.00
5,000.00

7 Traffic fines 500.00

Penalty for late delivery of goods to customers 1,000.00
1,500.00

8 Depreciation allowance agreed with Inland Revenue Department for the year
5,000.00
is:

9 Agreed tax loss brought forward: 24,000.00

Based on the information available, prepare the Hong Kong tax computations for McMickey in
respect of the year ended March 31, 2020. Show all your workings and ignore provisional tax
and overseas tax.

McMickey was a standalone company without any equity affiliation with other entities.

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