$1$st $-$ In$-$Class Case

$$ Your Co$.$ was established in $2010$ as a listed corporation in Kuwait. Below is the year$-$end financial position of $2018.$

Financial Position at $31/12/2018$

Kuwaitis Dinars $(000)$

Liabilities & Equity Assets

$2000$ Capital $500$ Buildings

Reserves: $400100$ Accumulated Deprecation

$300$ Statutory $1000$ Machinery

$300$ Voluntary $850150$ Accumulated Depreciation

$300$ Pension Provision $200$ Furniture

$100$ Retained Earnings $15050$ Accumulated Depreciation

$1000$ Foreign Investment

$200$ Receivables

$400$ Inventory

$3000$ Total $3000$ Total

Net income for the period is Kd $1\mathrm{.}67$ million. The inspections have revealed the following $($KD$)$:

$1.$ The company has received government subsidies totaling $150000$ against custom duties for commodities that are tax exempt. The company has not included this amount to income as it is out of its commercial operation.

$2.$ equipment was bought on $26$ of March $2018$ costing $5000$ and the whole amount was incurred on the period expenses, despite that $10\%$ annual depreciation is allowed by the tax resolutions.

$3.$ The year revenues included the following reverted reserves:

a$.$ Against securities devaluation $50000.$

b$.$ Against tax liability $15000.$

c$.$ Against Zakat liability $7500.$

d$.$ Pensions and remuneration $48400.$

e$.$ For doubtful accounts $2\%$ of reported receivables.

$4.$ Tax liability for the year $2017$ was $53980,$ the company paid $42\%$ on January $2018.$ The record that the remaining amount is to be added to $2018$ taxable income.

$5.$ Inventory turnover of the year was as such;

a$.$ Beginning balance $2000$ unit @ $10$ Kd$.$

b$.$ First quarter purchases $4000$ units @ $12$ Kd$.$ While sales $3000$ units.

c$.$ Second quarter purchases $5000$ unit @ $15$ Kd$.$ While sales $4000$ units.

d$.$ Third quarter purchases $6200$ units @ $16\mathrm{.}25$ Kd$.$ While sales were $5160$ units.

e$.$ Fourth quarter purchases $7150$ units @ $21\mathrm{.}8$ Kd$.$ While sales $8640$ units.

The company used FIFO until May $10$th$,2018,$ when management decided to change to LIFO. The market value of ending inventory is estimated to be $17900$ Kd$.$

$6.$ The company has a loan to a local bank of $27890$ Kd with a flat interest rate of $7\mathrm{.}5\%$ for $3\mathrm{.}5$ years. The company amortized the loan and the related cost of capital in full on $7$th of Nov. $2018.$

$7.$ Treasury shares that were sold in the open market on June $2$nd$,2018,$ for $420$ fils per share. These shares were carried over since July $14$th$,2012,$ at par value of $105$ fils which include a premium of $5$ fils. Reported income from this sale was $210$ fils.

$8.$ As per the company policies, transfer prices have embedded $5\%$ profit margin among internal units of the company. Total volume of the such transactions exceeded $1\mathrm{.}15$m during the year.

$9.$ Contingent liability provisions for court disputes are estimated to be proportionated to $0\mathrm{.}90$ of reported income, yet to be aggregated within extra$-$ordinary items. Usually, tax authorities allow for such provision upon materiality and occurrence comparable to cash basis.

$10.$ An amount of KD $17375$ has been retrieved from contracted projects dated May $2016.$ The amount was disclosed in $2016$ as held for settlement.

$11.$ Dues of foreign suppliers based FOB$-$Shipping have over and above handling commissions of $0\mathrm{.}35\%$ one basis point of shipments. The company used to add it up as freight$-$in expenses. On numerous incidences, tax inspector declined this items from operating expenses resulting in further disputes, until resolved as only half of the total is allowed. Company's shipments are estimated to be KD $604802$ for $2018.$

$12.$ Booked gains from diluted ownership securities in a catalyst subsidiary has not been reported yet, even though the audited financial contained a sum of Kd $36890$ gains from the same.

$13.$ Paid in capital has been issued with a $0\mathrm{.}5\%$ premium on outstanding sum of Kd $2\mathrm{.}25$m$.$ The capital has been received with the premium in full by march $2018.$ Tax declaration did not reflect this transaction as recommended by the auditor to be shifted to next financial year for solvency matters.

Required:

$1.$ Prepare the tax declaration of the company for the year ending $2018.$ If the tax rate is based on a flat rate of $32\%$ on taxable income exceeding $100000$ kd$,$ what is the tax liability of the year?

$2.$ Assume a progressive tax rate is enforced by incremental $4\%$ on every Kd $50000,$ start up percentage of $12\%?$

$3.$ If$,$ the company has the freelance to choose to be imposed according to a regressive tax rate of $28\%$ then reduced by $3\mathrm{.}5\%$ for every Kd $100000$ following the first half million, would it be worth considering?

$4.$ What is the tax rate if the starting rate is $14\%$ increased by $6\%$ bracketing of Kd $30000?$