QUESTION 2

Farhana, a graduate from UUM, was appointed as an account executive at Aprilla Tax Agency Sdn Bhd. During her first week of work, Farhana was assigned to prepare a tax return form for company's clients, Penchala Bhd. Penchala Bhd is one of the main manufacturers and suppliers of industrial chemical products and equipment that had been incorporated in 2015. The following is the carrying amount of asset and liabilities of the company as at 31 December 2021:

Items	Carrying amount (RM)
Property, plant and equipment	350,000
Land	900,000
Intangible assets	85,000
Investment in fixed deposit	360,000
Account receivable	255,000
Interest receivable	15,000
Inventory	130,000
Bank	200,000
Trade payables	180,000
Accrued interest	12,000
Penalties payable	5,000
Unearned revenue	18,000
Accrued warranties	30,000
8% Loan	150,000

Additional information:

1. The cost of the property, plant and equipment is RM500,000 when it was acquired in 2019. Depreciation expense for property, plant and equipment is calculated at the rate of 10% per year. Capital allowance that determined from the cost of asset is classified as 20% for initial allowance and 14% for annual allowance.
2. The freehold land was revalued to RM900,000 on 31 December 2021. The cost of land at the acquisition date two years ago was RM800,000.
3. The intangible assets consist of development expenditure of Penchala Bhds R&D project incurred during 2019 that was qualified to be capitalised. Amortization expense for 2021 was RM15,000.
4. An account receivable of RM50,000 from Cendana Sdn Bhd, one of the major customer of Penchala Bhd, is undergoing a liquidation process. It is estimated that the recoverable amount would be RM5,000.
5. Interest receivable is interest revenue earned from the investment in government bond.
6. Interest expense was incurred for the 8% loan from a financial institution.
7. A penalty of RM5,000 was imposed by the government on the company in current financial year.
8. Unearned revenue is a deposit required under Penchala Bhds policy that require new clients to make advance payments before the delivery of goods is made to them.
9. Product warranties were estimated to be RM50,000 in 2021. Actual repair and labor costs related to the warranties in 2021 were RM20,000. The remainder is estimated to be paid evenly in 2022 and 2023.
10. Taxable income for the current year was RM2 million.
11. The balance of deferred tax asset on 1 January 2021 was RM10,500. The tax rate for the assessment year 2021 was 24%.

REQUIRED:

1. Determine the carrying amount and tax base of asset and liabilities for Penchala Bhd and calculate the difference as at 31 December 2021. Indicate whether the difference is taxable temporary difference, deductible temporary difference or permanent difference.
2. Compute the deferred tax expenses for 2021 and prepare the related journal entries.