Question 1 (25 marks) You have been asked to prepare the tax-effect accounting adjustments for the year ended 31 December 2019 for Kitoro Berhad. Your investigation revealed the following information: (a) The assets and liabilities as at 31 December 2019 were: Cash Accounts receivable Allowance for doubtful debts Inventory Prepaid insurance Freehold land, cost Office building Accumulated depreciation - Office building Plant & equipment Accumulated depreciation - Plant & equipment Development costs -costs incurred Accumulated amortization Accounts payable Unearned rent revenue Provision for long service leave Provision for warranty Deferred tax liability 2019 RM 220,800 435,000 (45,000) 890,000 25,000 700,000 1,200,000 (144,000) 800,000 (300,000) 320,000 (180,000) 370,000 40.000 6,000 30,000 ? 2018 RM 198,500 400,000 (33,000) 760,000 22.000 550,000 1,600.000 (160,000) 800,000 (200,000) 200,000 (100,000) 350,000 32,000 4,200 24,000 91,000 (b) The profit for the year ended 31 December 2019 was RM3,750,000. (c) The company is entitled to claim a tax deduction of 120% for development costs in the year of expenditure. The company has adopted the accounting policy of capitalizing and then amortising the expenditure over four years. (d) Income for the year included: Government grant received (tax-exempted) Rent revenue Proceeds on sale of building RM300,000 RM250,000 RM380,000 (e) Expenses brought to account included: Amortisation - development expenditure Insurance expense Long service leave expense Donations (non-deductible) RM80,000 RM28,000 RM30,000 RM5,000 (1) Accumulated depreciation of plant & equipment for tax purposes was RM480,000 on 31 December 2018, and RM640,000 on 31 December 2019. (g) Bad debts of RM35,000 were written off during the year, and warranty claims to the value of RM26,000 were made by customers. (h) The company's accounting policy is to depreciate building over 50 years with no residual value. No deduction is allowed for tax purpose. The building sold during the year had a cost of RM400,000 when acquired 5 years ago. Any gain (loss) on sale of building is not taxable (deductible). No disposal of other non-current assets. (i) In September 2018, the government increased the company tax rate from 24% to 25%, effective from 1 January 2019. Required: i. Prepare the worksheets to calculate and record the current tax liability and any movements in deferred tax assets/liabilities in accordance with IAS 12/MERS 112 for the year ended 31 December 2019. [20 marks] ii. Prepare journal entries to record the current tax liability and deferred tax assets/liabilities in accordance with IAS 12/MERS 112 for the year ended 31 December 2019. [2 marks] iii. Give an example of temporary difference for Kitoro Bhd and discuss its tax effect. [3 marks)