Other information: The assessor has agreed that the tax deductible depreciation allowance on plant and machinery for year of assessment 2018/19 is HK$350,000. Required: Prepare SUN Limiteds profits tax computation and compute its profits tax liability for the year of assessment 2018/19. Show all your workings. Ignore provisional tax, tax rebate and property tax set-off.

Section A (28%) The following notes are relevant for preparation of tax computation: (1) Answer the question in this section in the answer sheet provided. The question carries 28 marks. Interest on a debenture issued by a Hong Kong company in Hong Kong Interest on loans to an associated company (loans made available in Australia) Interest from a USS fixed deposit placed with HSBC, San Francisco branch Interest from a HKS saving deposit placed with HSBC, Hong Kong branch HKS 20.000 40.000 45.000 15.000 120.000 Please refer to Appendix A for relevant Hong Kong tax rates, deductions and personal allowances. (2) Received from the shipping company due to delay of shipment of goods Received for cancellation of a major business contract Question Al 30.000 215.000 245.000 Part I (3) The patent right was acquired during the year ended 31 March 2018. The cost thereof had been previously allowed as a deduction. SUN Limited is a Hong Kong-incorporated company carrying on a trading business in Hong Kong. It prepares its accounts to 31 March each year. The income statement of the company together with the additional information for the year ended 31 March 2019 is as follows: (4) HK dollar bills of exchange (effected in the US) US dollar bills of exchange effected in HK) HKS 20,000 60.000 80.000 Note HKS HKS 7.530,000 Income from trading Dividends from quoted shares Interest income Compensation Debt waived by a trade creditor Income from the sale of patent right Gain on the disposal of bills of exchange 600,000 120.000 245.000 (5) Trade debts written off Increase in general provision Increase in special provision (untraceable debtors) 155.000 19.000 36.000 210,000 44.000 166,000 60.000 80,000 Less: debts (previously written off) recovered L.105.000 8,635,000 (6) Overseas agents whose addresses were known Agents whose identities were not disclosed 120,000 80.000 200.000 (1) Compensation paid for early termination of lease of the old office Penalty paid to clients for late delivery of goods 100.000 60.000 160.000 General and administrative expenses Bad debts provision Commission Compensation Contribution to MPF scheme Depreciation expenses Donations Entertaining expenses Interest expenses Legal and professional fees Repairs and maintenance Rant, rates, light and heat Salaries and wages Staff welfare Sundry expenses Tax paid Travelling expenses 166,000 200.000 160.000 180.000 500.000 120.000 140,000 55.000 100,000 80.000 1,500,000 1.803,000 275.000 180,000 240.000 123.000 Ordinary annual contribution (5% of staff salaries) Special contribution in one lump sum 60,000 120,000 180.000 (9) Cash donation to Community Chest Cash donation to Red Cross 70,000 50.000 120.000 (10) Paid to Mr Chan, an individual director. 55.000 Net profit 5.822.000 2.813.000 (11) Paid for lease of new office Paid for preparation of profits tax retum and reply of routine tax enquiries 70,000 30.000 100.000 (12) Annual dinner Trip to Macau as staff welfare 125.000 150.000 275.000 Page 4 of 13 Page 3 of 13 Section A (28%) The following notes are relevant for preparation of tax computation: (1) Answer the question in this section in the answer sheet provided. The question carries 28 marks. Interest on a debenture issued by a Hong Kong company in Hong Kong Interest on loans to an associated company (loans made available in Australia) Interest from a USS fixed deposit placed with HSBC, San Francisco branch Interest from a HKS saving deposit placed with HSBC, Hong Kong branch HKS 20.000 40.000 45.000 15.000 120.000 Please refer to Appendix A for relevant Hong Kong tax rates, deductions and personal allowances. (2) Received from the shipping company due to delay of shipment of goods Received for cancellation of a major business contract Question Al 30.000 215.000 245.000 Part I (3) The patent right was acquired during the year ended 31 March 2018. The cost thereof had been previously allowed as a deduction. SUN Limited is a Hong Kong-incorporated company carrying on a trading business in Hong Kong. It prepares its accounts to 31 March each year. The income statement of the company together with the additional information for the year ended 31 March 2019 is as follows: (4) HK dollar bills of exchange (effected in the US) US dollar bills of exchange effected in HK) HKS 20,000 60.000 80.000 Note HKS HKS 7.530,000 Income from trading Dividends from quoted shares Interest income Compensation Debt waived by a trade creditor Income from the sale of patent right Gain on the disposal of bills of exchange 600,000 120.000 245.000 (5) Trade debts written off Increase in general provision Increase in special provision (untraceable debtors) 155.000 19.000 36.000 210,000 44.000 166,000 60.000 80,000 Less: debts (previously written off) recovered L.105.000 8,635,000 (6) Overseas agents whose addresses were known Agents whose identities were not disclosed 120,000 80.000 200.000 (1) Compensation paid for early termination of lease of the old office Penalty paid to clients for late delivery of goods 100.000 60.000 160.000 General and administrative expenses Bad debts provision Commission Compensation Contribution to MPF scheme Depreciation expenses Donations Entertaining expenses Interest expenses Legal and professional fees Repairs and maintenance Rant, rates, light and heat Salaries and wages Staff welfare Sundry expenses Tax paid Travelling expenses 166,000 200.000 160.000 180.000 500.000 120.000 140,000 55.000 100,000 80.000 1,500,000 1.803,000 275.000 180,000 240.000 123.000 Ordinary annual contribution (5% of staff salaries) Special contribution in one lump sum 60,000 120,000 180.000 (9) Cash donation to Community Chest Cash donation to Red Cross 70,000 50.000 120.000 (10) Paid to Mr Chan, an individual director. 55.000 Net profit 5.822.000 2.813.000 (11) Paid for lease of new office Paid for preparation of profits tax retum and reply of routine tax enquiries 70,000 30.000 100.000 (12) Annual dinner Trip to Macau as staff welfare 125.000 150.000 275.000 Page 4 of 13 Page 3 of 13