(5) Interest on HK$ deposit ($300,000) with a bank in Hong Kong, used as security for a bank loan [see note (9) below] $4,000 Interest on overdue trade receivables from a local customer 8,000 Interest on HK$ loan made to an individual shareholder (the loan was remitted to shareholder's bank account in Hong Kong) 6,000 Interest on Tax Reserve Certificate bought from the HKSAR government 2.000 Total per accounts 20.000 (6) Rates and utilities of Sealink's office $250,000 Rent, rates and utilities for the director's apartment 350.000 Total per accounts 600,000 (7) Director's fee $680,000 Wages for the director's family helper 180.000 Total per accounts 860.000 (8) Salaries to staff $1,000,000 Regular MPF contributions of 5% for staff 50,000 Loan to an employee written off on his resignation 150,000 Payment to a leaving staff member for a promise not to join a competitor 130,000 Total per accounts L.330.000 Note: Sealink made a special contribution to MPF in the year ended 31 December 2017 in the amount of $200,000. (9) Interest on a bank loan of $300,000 for operating use, secured by the HK$ deposit [see note (5) above] $13,000 Hire purchase finance charge on computers [see note (1 1) below] 800 Interest on bank mortgage loan for acquiring the property [see note (2) above] 29,200 Interest on loan from shareholder for acquiring the property [see note (2) above] 14.000 Total per accounts $7.000 (10) Audit and tax filing fees $80,000 Legal fees for claiming compensation on the early termination of a service contract [see note (4) above] 30,000 Legal fees for renewing lease of the director's apartment [see note (6) above] 2,000 Tax advisory fees for lodging a tax appeal 16.000 Total per accounts 128.000 (1 1) The total depreciation charge for the year is $220,000 based on the book value of Sealink's non-current assets as at 31 December 2019. During the year, the following addition/disposals were made: Date Particulars I May 2019 Disposal of a company car for $10,000. The original cost and net book value of the car were $180,000 and $25,000 respectively. 1 Aug 2019 Purchase of an electric vehicle which satisfies the environmental control requirement under the Air Pollution Control Ordinance at $320,000. 1 Oct 2019 Purchase of new computers costing $50,000 under hire purchase. The hire purchase terms provide for a down payment of $10,000, which was paid on 1 Oct 2019, followed by 8 monthly instalments of $5,400 each, starting from I Nov 2019. 1 Feb 2020 Purchase of filing cabinets at $30,000. 3(12) Property tax paid for the leased property in Wan Chai [see note (2) above] $115.200 Salaries tax paid for the director 40.800 Total per accounts 156.000 (13) New carpets for conference room $40,000 Club entrance and annual subscription for director 8.000 Total per accounts 48.000 (14) Surgical masks at value of $200,000 was donated to the Po Leung Kuk. (15) As shown in Sealink's profits tax return for 2018/19, it has a tax loss of $472, 400 eligible for carry forward to future years. The tax written down values brought forward in respect of its plant and machinery pools are 10% - nil; 20% - $180,000; 30% - $150,000. The qualifying expenditure for commercial building allowance in respect of the property in Wan Chai is $25,000,000 and tax written down value carried forward is $21,000,000. Required: Calculate Sealink Ltd's profits tax liability in respect of the year ended 31 December 2019. Clearly identify the year of assessment, the relevant basis period, the assessable profits/adjusted loss, the net assessable profits/adjusted loss and profits tax payable, if any. Show all workings including the depreciation allowance schedule with details of calculation. (40 marks) [Total for Question 1: 40 marks] 4Answer ALL questions. Total marks for this section are 100. Question 1 (40 marks) Sealink Lid (Sealink), a Hong Kong-incorporated company, provides financial advisory services in Hong Kong. For the year ended 31 December 2019, Sealink had the following income and expenditure: Income Note Advisory service fee (1) 5,400.000 Rental income (2) 960,000 Investment income (3) 1,320.000 Compensation income ( 4) 100,000 Interest income (5) 20,000 7,800,000 Expenses Rent, rates and utilities (6) (600,000) Directors' remuneration (7) (860,000) Staff costs (8) (1,330,000) Interest expenses (9) (57,000) Legal and professional fees (10) (128,000) Depreciation (11) (220,000) Loss on disposal of fixed assets (11) (15,000) Taxation expense (12) (156,000) Miscellaneous expenses (13) (48,000) Donations (14) (200.000) (3,614,000) Profit before tax for the year 4,186.000 Notes: (1) Sealink provides financial advisory services to both Hong Kong ($3,000,000) and overseas customers ($2,400,000). All services are rendered by staff in Hong Kong- (2) Sealink owned a property in Wan Chai which is partly used by Sealink as its office and partly leased out at a monthly rental of $80,000. The property was acquired when new by Sealink in June 2015 at a cost of $30,000,000. The purchase cost was partly funded by a bank mortgage loan and partly by a borrowing from Sealink's shareholder, Mr Chan. The bank loan was secured by a mortgage over this property, and the borrowing from Mr Chan was not secured. (3) Gain from trading in China listed shares $900,000 Loss from trading in Hong Kong listed shares (100,000) Dividends from Hong Kong listed shares 40.000 Profit from trading in foreign currencies 290,000 Exchange gain (realised) from the settlement of accounts receivables 120,000 Exchange gain (unrealised) from the year-end conversion of foreign currency bank deposits 70,000 Total per accounts L.320.000 (4) During the year, Sealink received $100,000 as compensation from a customer for the loss suffered due to the early termination of service contract. 2