During the year AKT traded very well given the economic conditions.

However some customers could not pay their invoices to AKT and one large customer offered to provide a second hand 5 tonne truck as payment for the invoice. The amount owing on the invoice was $15,500. The current market value of the truck was $14,000.

As the accountants to the company, you advised the company to make provisions in the financial statements for the following:

1. 1. Annual leave for the staff $12,000
2. 2. Bad and Doubtful debts $18,000

During the year the directors advised that only $8,000 of annual leave was paid and the actual debts considered to be bad and uncollectible was only $7,200.

Being the CEO of the company Akhtar believed that the company should acquire for his benefit a Telsa Model 3. The cost was $223,000 (including the COE). The running costs for the care was $15,000. The car was acquired on 9 February 2024.

Kat was happy to use public transport and Grab when she needed to get around Singapore.

Issues they seek advice on:

1. 1. How is the payment of the invoice of $15,500 treated when no cash was received? How is the difference between the $15,500 and the $14,000 treated?
2. 2. Explain how the two amounts of provisions are dealt with under the Income Tax Act and what amount if any is allowable as a deduction?

Mohamed Akhtaruzzaman (Akhtar) aged 37 and Kathryn Aybar-Chiew (Kat) aged 34 are the directors of a logistics company in Singapore. The name of the company is AK Transport Pte Ltd (AKT). The shareholders are the company are private companies owned by Akhtar and Kat. Akhtar's private company owns 65% of the shares and Kat's private company owns 35% The company has 35 staff and is located in an industrial estate near Changi Airport. The company has been in existence for 5 years. The company as well as the director ands their immediate family are all clients of the firm. The income sources for the company are from sales received from local customers as well as international customers. Two of their major customers from overseas are Amazon and a new company called Temu. The company offers a transport solution and a storage facility for clients. Being a logistics company it needs to maintain relationships with many overseas countries and staff are sometimes required to travel overseas to maintain contacts with existing customers and also find new customers. Given the uncertainty in the global economy and the threat of global recession the company had had to had to undertake various steps to increase revenue as well as reduce costs. Akhtar and Kat have requested a meeting with Jonathan to discuss various tax and accounting, corporate law issues. Jonathan is away in Western Sumatra on business for another client of KT and cannot attend the meeting. He will not be back until Monday 14 March 2024. Therefore, he has requested the senior manager (Sunil) to organise the meeting with the clients. He has asked you: 1. to sit in on the meeting and 2. take notes on the issues raised and then to 3. prepare a written report on the matters for review by Sunil and Jonathan. The meeting is scheduled for Friday 1 March 2024 at 9 am. You will be expected to take notes of the meeting and then prepare a draft statement of advice for Sunil and Jonathan to review. You are to use the attached template form to prepare your draft statement of advice. Once Sunil is happy with the report, he will send to Jonathan for review. |