0.1 IPM Garment Manufacturing Company operates in Macau. Its profit and loss account for the year ended 31 December 2014 as follows: MOPS MOPS Sales 85,000,000 Dividend income 500.000 Other income 1.500.000 Total income 87,000,000 Cost of goods sold 66,000,000 Salaries and wages 12,500,000 Depreciation 1,140,000 Increase to provision for loss of inventory value 300,000 Donations 190,000 Taxes 134,000 Miscellaneous expenses 200,000 (80.464.000 Profit before tax 6,536,000 Provisional Complementary Income Tax (950.000) Profit after tax 5.586.000 Additional Information: i) Dividend income was derived from investing in an associated company (a Group A taxpayer) in Macau. It represented IPM's share of the associated company's after tax profit (Complementary Income Tax already paid by the associated company). ii) Included in other income is MOP558,000 of tax refunded (related to the year 2011) by the Finance Services Bureau. The remaining amount included MOPS400,000 as gain on sale of a patent right and MOP$42,000 as interest earned on a note receivable. iii) Salaries and wages include employees' Professional Tax of MOP$280,000. iv) Depreciation expense was calculated based on straight-line and zero salvage value. Details are as follows: Fixed asset Cost (MOPS) Depreciation (MOPS) Electronic equipment and machinery 3,000,000 600,000 Non-electronic equipment and machinery 1,600,000 320,000 Office computer system 400,000 80,000 Heavy vehicles 700,000 140,000 Total 1,140,000 v) In order to reflect the real value of ending inventory in the company's balance sheet based on the lower-of-cost-or-market principle, IPM has since the year 2014 set up a provision account for loss of inventory value. The ending book value of inventory on 31 December, 2014 was MOP$6,000,000 The fair market value of the inventory on the same day was MOP$5,700,000. vi) Donations included MOP$120,000 to Tung Sin Tong and MOP$70,000 to the Macau Red Cross. Both of them are approved charitable organizations in Macau. vii) Taxes included Industrial Tax MOP$300 and Urban Property Tax MOP$133,700. viii) The 31 December 2014 ending balance of accounts receivable was MOP$7,000,000. On the same day, the remaining balance of the provision for bad debt account was MOP$180,000. This amount of provision was set up in 2013. No additions or deductions were made to the provision account in 2014. ix) Miscellaneous expenses included the following: Advertising and promotion Insurance for managers (not compulsory) Selling and distribution Communication expenses Rent Financial expenses Legal expenses Compensation for an insurable loss (but no insurance had been purchased) MOP$30,000 19,000 30,000 12,000 47,000 30,000 7,000 25,000 MOP$200,000 Required: Calculate IPM's 2014 Complementary Income Tax payable. Provide explanations to support your calculations by citing the relevant articles. 0.1 IPM Garment Manufacturing Company operates in Macau. Its profit and loss account for the year ended 31 December 2014 as follows: MOPS MOPS Sales 85,000,000 Dividend income 500.000 Other income 1.500.000 Total income 87,000,000 Cost of goods sold 66,000,000 Salaries and wages 12,500,000 Depreciation 1,140,000 Increase to provision for loss of inventory value 300,000 Donations 190,000 Taxes 134,000 Miscellaneous expenses 200,000 (80.464.000 Profit before tax 6,536,000 Provisional Complementary Income Tax (950.000) Profit after tax 5.586.000 Additional Information: i) Dividend income was derived from investing in an associated company (a Group A taxpayer) in Macau. It represented IPM's share of the associated company's after tax profit (Complementary Income Tax already paid by the associated company). ii) Included in other income is MOP558,000 of tax refunded (related to the year 2011) by the Finance Services Bureau. The remaining amount included MOPS400,000 as gain on sale of a patent right and MOP$42,000 as interest earned on a note receivable. iii) Salaries and wages include employees' Professional Tax of MOP$280,000. iv) Depreciation expense was calculated based on straight-line and zero salvage value. Details are as follows: Fixed asset Cost (MOPS) Depreciation (MOPS) Electronic equipment and machinery 3,000,000 600,000 Non-electronic equipment and machinery 1,600,000 320,000 Office computer system 400,000 80,000 Heavy vehicles 700,000 140,000 Total 1,140,000 v) In order to reflect the real value of ending inventory in the company's balance sheet based on the lower-of-cost-or-market principle, IPM has since the year 2014 set up a provision account for loss of inventory value. The ending book value of inventory on 31 December, 2014 was MOP$6,000,000 The fair market value of the inventory on the same day was MOP$5,700,000. vi) Donations included MOP$120,000 to Tung Sin Tong and MOP$70,000 to the Macau Red Cross. Both of them are approved charitable organizations in Macau. vii) Taxes included Industrial Tax MOP$300 and Urban Property Tax MOP$133,700. viii) The 31 December 2014 ending balance of accounts receivable was MOP$7,000,000. On the same day, the remaining balance of the provision for bad debt account was MOP$180,000. This amount of provision was set up in 2013. No additions or deductions were made to the provision account in 2014. ix) Miscellaneous expenses included the following: Advertising and promotion Insurance for managers (not compulsory) Selling and distribution Communication expenses Rent Financial expenses Legal expenses Compensation for an insurable loss (but no insurance had been purchased) MOP$30,000 19,000 30,000 12,000 47,000 30,000 7,000 25,000 MOP$200,000 Required: Calculate IPM's 2014 Complementary Income Tax payable. Provide explanations to support your calculations by citing the relevant articles
