(Malaysia tax system)

QUESTION 3 (25 MARKS) The following is the information about GERM Enterprise. With reference to the Income Tax Act 1967 and the relevant Public Rulings issued by the Inland Revenue Board of Malaysia, advice cach partner on the amount of total income for the year of assessment 2019. Support your answer with relevant computations. GERM Enterprise is a partnership established since six (6) years ago between Ghani and Erman. The accounting period of the partnership ends on 31 December annually. The partnership agreement showed that profit loss is to be distributed equally among the partners On 1 July 2019. Ramona joined GERM Enterprise, and the profit/loss continued to be distributed equally among each partner. The partnership agreement also provides the following information: Capital contribution Salary per month Interest on capital per annum Ghani 60,000 5,000 4% Erman 30,000 4,000 4% Ramona 30.000 2.000 4% On 1 September 2019, Erman left the partnership and Endah joined the partnership. Emman withdrew all his profit and contribution while Endah contributed RM30,000 as capital into the partnership. The new agreement for the partnership is as follows: Ghani Ramona Endah Salary per month 6,000 4,000 3.000 Interest on capital per annum 5% 5% 5% Profit or loss sharing ratio 50% 30% 20% The income statement for partnership for year ended 31 December 2019 is as follows: RM 576,000 (138,000) 438,000 2 GERM Enterprise Income Statement For the Year Ended 31 December 2019 Note RM Sales Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Salary 3 (200,000) Rent expense 4 (40.000) Insurance 5 (4.500) Interest 6 19.500) Office expenses 7 (40,000) Sundry 16.000) Operating expenses Net profit from business operation Add: Other Income Gain from disposal of asset 8 12.000 Rental income 9 50.000 Total Net Profit (300,000) 138,000 62,000 200,000) Notes to the account: 2. Sales include compensation received from the supplier who breached contract and insurance company for the damage of office equipment amounting to RM4,000 and RM6,000 respectively, Cost of goods sold includes stock valued at RM7,000. yet to be sent to a customer due to delay in transporting the goods. Salary includes: RM Partners' salary 128,000 Ramona's entertainment allowance 11,000 Salary of Ghani's wife as marketing manager 12.000 Rent expense includes rental of Emman's apartment and repair of Ramona's house amounting to RM9,000 and RM3,000 respectively. 3. 4. 5. Insurance includes: Ghani's life insurance Erman's car insurance RM 1.400 1.200 6. 7. Interest comprise of partners" interest and interest on business loan. Office expenses include: RM Penalty for Endah's traffic summon 300 Business penalty 1.800 Approved donation (during year-end sales) 9.000 Depreciation Computation of balancing charge related to the disposal of asset was RM9.000. Half of the rental income was from Endah's property and the remaining was from partnership's business premise. 20,000 8. Additional information: i. Capital allowance for year of assessment 2019 was RM18.000. Loss brought forward was RM20,000. ii. (25 Marks) QUESTION 3 (25 MARKS) The following is the information about GERM Enterprise. With reference to the Income Tax Act 1967 and the relevant Public Rulings issued by the Inland Revenue Board of Malaysia, advice cach partner on the amount of total income for the year of assessment 2019. Support your answer with relevant computations. GERM Enterprise is a partnership established since six (6) years ago between Ghani and Erman. The accounting period of the partnership ends on 31 December annually. The partnership agreement showed that profit loss is to be distributed equally among the partners On 1 July 2019. Ramona joined GERM Enterprise, and the profit/loss continued to be distributed equally among each partner. The partnership agreement also provides the following information: Capital contribution Salary per month Interest on capital per annum Ghani 60,000 5,000 4% Erman 30,000 4,000 4% Ramona 30.000 2.000 4% On 1 September 2019, Erman left the partnership and Endah joined the partnership. Emman withdrew all his profit and contribution while Endah contributed RM30,000 as capital into the partnership. The new agreement for the partnership is as follows: Ghani Ramona Endah Salary per month 6,000 4,000 3.000 Interest on capital per annum 5% 5% 5% Profit or loss sharing ratio 50% 30% 20% The income statement for partnership for year ended 31 December 2019 is as follows: RM 576,000 (138,000) 438,000 2 GERM Enterprise Income Statement For the Year Ended 31 December 2019 Note RM Sales Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Salary 3 (200,000) Rent expense 4 (40.000) Insurance 5 (4.500) Interest 6 19.500) Office expenses 7 (40,000) Sundry 16.000) Operating expenses Net profit from business operation Add: Other Income Gain from disposal of asset 8 12.000 Rental income 9 50.000 Total Net Profit (300,000) 138,000 62,000 200,000) Notes to the account: 2. Sales include compensation received from the supplier who breached contract and insurance company for the damage of office equipment amounting to RM4,000 and RM6,000 respectively, Cost of goods sold includes stock valued at RM7,000. yet to be sent to a customer due to delay in transporting the goods. Salary includes: RM Partners' salary 128,000 Ramona's entertainment allowance 11,000 Salary of Ghani's wife as marketing manager 12.000 Rent expense includes rental of Emman's apartment and repair of Ramona's house amounting to RM9,000 and RM3,000 respectively. 3. 4. 5. Insurance includes: Ghani's life insurance Erman's car insurance RM 1.400 1.200 6. 7. Interest comprise of partners" interest and interest on business loan. Office expenses include: RM Penalty for Endah's traffic summon 300 Business penalty 1.800 Approved donation (during year-end sales) 9.000 Depreciation Computation of balancing charge related to the disposal of asset was RM9.000. Half of the rental income was from Endah's property and the remaining was from partnership's business premise. 20,000 8. Additional information: i. Capital allowance for year of assessment 2019 was RM18.000. Loss brought forward was RM20,000. ii. (25 Marks)