Question 1 (50 marks) ABC Ltd is a computing consulting company with its accounting year ended 31 December. The profit before tax for year ended 31 December 2018 was financial statements: 2 $5,450,000 after including the following items in its Income: Compensation for early termination ofa business contract by a customer 135,000 Share of profits from an associated company. 380,000 Exchange gain from daily business related payable balance 18,500 Interest income from loans advanced to employees in HK 7,500 Interest income from unpledged deposit placed with a local bank 2,400 Interest income from long outstanding business related receivable balance due from overseas customers 8,600 General bad debt provision written back 18,400 Deposit forfeited by customers due tocancellation of service engagement 000 Expenditure:- Interest expense on overdue account payable to an unrelated overseas hardware supplier regarding the purchase ofa computersystem in prior 3,600 year Interest expense on a bank loan from HSBC guaranteed by ABC Ltds director personally (the loan was business activities) exclusively used for ABC Ltd s daily 85,000 Interest expense on an unsecured bank loan from Standard Chartered Bank (the loan was exclusively used for the acquisition of certain listed shares for long term investment purposes) 78,000 Special contribution to ABC Ltds recognised occupational retirement scheme covering previous investment loss Annual contribution to ABC Ltd s recognised occupational retirement 165,000 690,200 scheme (17% of each employees annual remunerations) Refurbishmentexpense for a residential property currently used by ABC Ltdsdirector as quarters 300,000 Refurbishmentexpense for a commercial property currently used by ABC Ltd as office premises 750,000 Tax payment (salaries tax of ABC Ltd s director) 280,000 Tax payment (property tax of self owned property) 120,000 Tax payment (property tax of a director) 52,000 Accounting depreciation 160,500 ABC Ltdalso provided information on fixed assets movementand other tax information as follows: Addition of office furniture 100,500 Addition of computer equipment 120,000 Addition of a motor vehicle 285,000 Tax written down value for 20% pool brought forward 98,300 Tax written down value for 30% pool brought forward 127,000 Qualifying expenditure claiming for commercial building allowance brought forward (all expenditure referred to office premises and director s quarters decoration incurred in prior years. Such properties were all demolished during the yeardue to refurbishmentas peritem (i)above) 450,000 Taxwritten down value brought forward attributable to qualifying 340,000 expenditure claiming for commercial building allowance as perabove Required Calculation the depreciation allowances for deduction of ABC Ltd for 2018/19 under Part 6 of Inland Revenue Ordinance Determine the profit tax liabilities of ABC Ltd for year ended 31 December 2018. ((Ignore provisional tax and any tax waiver or tax reductions in your calculation. Assume the taxpayerwould not be qualified for the 2-tiered profits Explain your treatment of the expenditure with (*) when preparing the tax computation in part (a) (15 marks) b. (20 marks) tax rate.) C. (15 marks) Question 1 (50 marks) ABC Ltd is a computing consulting company with its accounting year ended 31 December. The profit before tax for year ended 31 December 2018 was financial statements: 2 $5,450,000 after including the following items in its Income: Compensation for early termination ofa business contract by a customer 135,000 Share of profits from an associated company. 380,000 Exchange gain from daily business related payable balance 18,500 Interest income from loans advanced to employees in HK 7,500 Interest income from unpledged deposit placed with a local bank 2,400 Interest income from long outstanding business related receivable balance due from overseas customers 8,600 General bad debt provision written back 18,400 Deposit forfeited by customers due tocancellation of service engagement 000 Expenditure:- Interest expense on overdue account payable to an unrelated overseas hardware supplier regarding the purchase ofa computersystem in prior 3,600 year Interest expense on a bank loan from HSBC guaranteed by ABC Ltds director personally (the loan was business activities) exclusively used for ABC Ltd s daily 85,000 Interest expense on an unsecured bank loan from Standard Chartered Bank (the loan was exclusively used for the acquisition of certain listed shares for long term investment purposes) 78,000 Special contribution to ABC Ltds recognised occupational retirement scheme covering previous investment loss Annual contribution to ABC Ltd s recognised occupational retirement 165,000 690,200 scheme (17% of each employees annual remunerations) Refurbishmentexpense for a residential property currently used by ABC Ltdsdirector as quarters 300,000 Refurbishmentexpense for a commercial property currently used by ABC Ltd as office premises 750,000 Tax payment (salaries tax of ABC Ltd s director) 280,000 Tax payment (property tax of self owned property) 120,000 Tax payment (property tax of a director) 52,000 Accounting depreciation 160,500 ABC Ltdalso provided information on fixed assets movementand other tax information as follows: Addition of office furniture 100,500 Addition of computer equipment 120,000 Addition of a motor vehicle 285,000 Tax written down value for 20% pool brought forward 98,300 Tax written down value for 30% pool brought forward 127,000 Qualifying expenditure claiming for commercial building allowance brought forward (all expenditure referred to office premises and director s quarters decoration incurred in prior years. Such properties were all demolished during the yeardue to refurbishmentas peritem (i)above) 450,000 Taxwritten down value brought forward attributable to qualifying 340,000 expenditure claiming for commercial building allowance as perabove Required Calculation the depreciation allowances for deduction of ABC Ltd for 2018/19 under Part 6 of Inland Revenue Ordinance Determine the profit tax liabilities of ABC Ltd for year ended 31 December 2018. ((Ignore provisional tax and any tax waiver or tax reductions in your calculation. Assume the taxpayerwould not be qualified for the 2-tiered profits Explain your treatment of the expenditure with (*) when preparing the tax computation in part (a) (15 marks) b. (20 marks) tax rate.) C. (15 marks)