ABC Ltd is a computing consulting company with its accounting year ended on 31 December. The profit before tax for the year ended 31 December 2018 was $1,250,000 after including the following items in its financial statements.

Income

Compensation for early termination of a business contract by a customer 100,000

Dividend from a subsidiary company 150,000

Exchange gain from daily business-related payable balance 20,000

Interest income from loans advanced to employees 7,500

Interest income from unpledged deposit placed with a local bank 2,000

Interest income from outstanding business-related receivable balance due from overseas customers 8,000

General bad debt provision written back 18,000

Deposit forfeited by customers due to cancellation of service engagement 110,000

Expenditure

Interest expense on overdue accounts payable to an unrelated overseas hardware supplier regarding the purchase of a computer system in a prior year 3,100

Interest expense on a bank loan from HSBC guaranteed by ABC Ltd's director personally (the loan was exclusively used for ABC Ltd's daily business activities) 80,000

Interest expense on an unsecured bank loan from Standard Chartered Bank (the loan being exclusively used for the acquisition of certain listed shares for long-term investment purposes) 72,000 *

Special contribution to ABC Ltd's recognized occupational retirement scheme for covering previous investment loss 120,000 *

Annual contribution to ABC Ltd's recognized occupational retirement scheme (17% of each employee's annual remunerations) 690,200 *

Refurbishment expense for a residential property currently used by ABC Ltd's director as quarters 400,000 *

Refurbishment expense for a commercial property currently used by ABC Ltd as office premises 600,000 *

Tax payment (salaries tax of ABC Ltd's director) 280,000 *

Tax payment (property tax of self-owned property) 100,000 *

Accounting depreciation 180,000

Donation to charitable organization 1,000,000

ABC Ltd also provided information on fixed assets movement and other tax information as follows.

Addition of office furniture 80,000 Addition of computer equipment 110,000

Addition of a motor vehicle 250,000

Tax written down value for 20% pool brought forward 98,500

Tax written down value for 30% pool brought forward 124,000

Qualifying expenditure claiming for commercial building allowance brought forward (all expenditure referred to office premises and director's quarters' decoration incurred in prior years. Such properties were all demolished during the year due to refurbishment.) 350,000

Tax written down value brought forward attributable to qualifying expenditure claiming for commercial building allowance 300,000

Required

1.Calculate the depreciation allowances for deduction of ABC Ltd for 2018/19. (15 marks)

2.Determine the profit tax liabilities of ABC Ltd for the year ended 31 December 2018. (Ignore provisional tax and any tax waiver or tax reductions in your calculation. Assume the taxpayer would not be qualified for the two-tiered profits tax rate.) (30 marks)

3.Explain your treatment of the expenditure with (*) when preparing the tax computation in part (b). (15 marks)