Anggun Bhd. a company engaged in the manufacturing of the telecommunication equipment prepares its accounts to 30 June annually. The company is resident in Malaysia for the tax purposes and its Income Statement for the year ended 30 June 2018 is as follow: Anggun Bhd Income Statement for the year ended 30 June 2018 Note RM'000 RM'000 Sales 20,000 Less: cost of sales: Opening stocks 3,200 Cost of goods sold 11,600 14,800 Closing stocks 2 (2,800) (12,000) Gross profit 8,000 Add: Other income: Dividend CO 511 Interest on fixed deposit 4 114 Profit on sale of fixed assets 301 926 8,926 Less: Administration expenses: Salaries and allowance 5 1,095 Maintenance, utilities and insurance 475 Legal and professional fees 120 Subscriptions and donations -O 380 Depreciation 130Notes: Selling and distribution expenses: Salaries and commissions 1.860 Advertising: promotions and Entertainment 8 280 Freight and insurance 9 460 Motor and travelling expenses 10 720 Financial expenses: Interest charges 11 480 Foreign exchange differences 12 50 (,@) Prot before taxation 1% 1. Included in cost of goods sold manufactured are: RM'OOO i. Approved research and development expenses 150 ii. Approved training expenses 100 iii. A royalty fee due to a Swedish company, calculated at 1% of sales. The relevant withholding tax has been paid to the inland revenue board 200 Depreciation: Factory 200 Plant and machinery w E 2. Included in the closing stock is provision for stock obsolescence of RM55,000_ 3. Dividend from company resident in Malaysia (single tier). 4. Interest income comprise: RM'OOO Interest charged for late payment of trade debts 45 Interest accrued on xed deposits at year end E M 5. Salaries and allowances include: RM'OOO Annual salary (gross) of the executive chairman 240 EPF contribution for executive chairman 86.4 Contractual bonus to the executive chairman 120 446.4 6. Legal and professional fees comprise: RM'OOO Renewal of trademark and secret process 45 Accou nting fees 20 Design fees printing of brochures 18 Legal fees incurred on appeals of income tax 37 120 7. Subscriptions and donations include cash donations of the RM260:000 to an approved institution and donation of old computers to schools valued at RM25,000 8. Advertising. promotion and entertainment included: RM'OOO Advertisements in trade magazines 35 Annual dinner for distributors 15 Entertainment of customers (related to sales) 18 Employee of the year award celebrations 10 Staff entertainment 12 9. Freight and insurance included premiums paid to a Malaysian insurance company on imported goods of RM65,000 10. Motor and travelling expenses included: RM'OOO Vehicle maintenance and fuel 225 Overseas leave passages 50 Lease rentals Proton Inspira (Monthly rental of RM5,500 from 1.1.2018) 33 308 (The cash price ofthe car is RM98,000) 11. Interest charges included RM25,000 attributable to an investment made in a resident company in Malaysia. 12 Foreign exchange comprises: RM'OOO Loss arising from translation of foreign bank loan at nancial year end for the purpose of investment (unrealized) 30 Gain arising from payment to foreign supplier of raw materials (realized) (20) Loss on payment for the purchase of plant and machinery (realized) 40 50 13. Capital allowances were as follows: RM'000 rate of annual allowance (%) Factory buildings 24 3 Plant and machinery A 168 14 Office furniture and fittings 75 10 Plant and machinery B 170 14 Plant and machinery B were acquired for the purpose of expansion of production capacity. In addition, the company also incurred expenditure of RM150,000 for factory extension which is included in maintenance, utilities and insurance costs. These premises are used in connection with the expansion of capacity. Required: i. Compute the company's tax liability for the year of the assessment 2018. Every item in the notes to the account must be shown in your computation. Write 'NIL' where no adjustment is required. ii. Explain with reason/s your treatment of every item in the notes
