Question 3 Reliable Ready Food Sdn Bhd is engaged in the business of operating restaurants and food catering throughout Malaysia. The company was incorporated on 1.7.20X5 with a paid-up share capital of RM2 million. The company's profit and loss account for the year ended 30.06.20x7 is as follows: Note RM Turnover Add: Interest Income RM 563,000 2.300 1 2 Less: Cost of sales Gross margin 565,300 246.900 318,400 3 4 5 Less Depreciation Salaries Premise costs Bad and doubtful debts Cutlery and glassware Training ul "Halal" certification Miscellaneous expenses Insurance Loss on sale of van 10,000 43,560 41,200 5,000 21.290 8,430 1,500 23,650 15,780 700 7 8 9 10 171.110 Net Profit 147.290 Notes: (1). (2) Interest income comes from fixed deposit placed with Mesrabank Bhd for the period of one year ending on 30.06.20x7. Cost of sales include an amount of RM3,200 written off due damaged consignment of vegetables damaged in an accident on Kesas highway. Another RM5,800 was written off for an anticipated foreign exchange loss from seafood purchased from Indonesia which the company expects to incur. Salaries include RM3,500 of consultation fees to a hotel chef for consultation work done on presentation of food. (3) (4) Premises costs includes: (a) Repairs done on a bungalow purchased to convert to a restaurant. The repairs cost RM39,000 and the balance RM2,200 was incurred for repainting of the premise. (5) Bad and doubtful debts comprise of: (a) General provision of doubtful debts of RM3,500. 3 (6) (b) A specific provision of RM1,500 made for food supplied to a three star hotel in Ipoh which has ceased its operations. The company incurred RM11,290 purchasing cutlery and glassware in which RM1,290 was incurred to replace old and broken items. The company organised cooking and preparation class for unemployed youths who were later sent to the restaurant for practical training. Total expense incurred is RM8,430. (7) (8) The expenditure incurred on "Halal" certification consists of: (a) Capital expenditure of RM1,000 (b) Revenue expenditure of RM500 (9) Miscellaneous expenses include: (a) Fine paid to DBKL for non compliance of cleanliness standards of RM10,000 (b) Donation made to approved institutions of RM13,650 (10) Insurance include: (a) Premium paid for the life insurance of the Head Chef who is a key employee where the beneficiary of the insurance is Reliable Ready Food Sdn Bhd. The premium paid is RM600 per annum. The insurance does not have any residual balance at the end of the policy. The balance of insurance expenses of RM15,180 are for fire and public liability insurance. (11) The company rented out one of its premise to another company which produces frozen foods. Total rental collected for YA20X7 was RM24,000. (12) Net book value of the lorry was 12,700 and the residual expenditure of the lorry was RM15,000 (13) Capital allowances for YA 20X7 is RM15,000. Required: Compute the chargeable income of the business for YA 20x7. 4
