SECTION A Answer ALL questions. Question 1 (30 marks)

Zeng Pte Ltd (ZPL) carries on a mobile phone manufacturing business in Singapore. It was incorporated in Singapore on 1 October 2012 and its first set of accounts was prepared for the year ended 30 September 2013. The business was started by four university friends, Zackary, Emma, Nat and Gareth. Unfortunately, Zackary had to return to Perth on 1 September 2019 as his mother was very ill. Nevertheless, the business continued. The directors hold their directors meetings in Singapore.

ZPLs net profit before tax for the accounting year ended 30 September 2019 was $8,500,000 after taking into account the following:

$

Income:

Interest income from UOB Bank, an approved financial institution in Singapore. Exchange gain on the purchase of phone microchips from India.

Recovery of trade debts written off in previous year.

Expenses:

Rental of factory and office. Depreciation.

Annual audit fees. 5 identical display cabinets for new retail space. Staff salaries, bonus and CPF. Directors remuneration. Directors fees. Certification fees paid to an external consultant for quality check for its new mobile phone model. Snacks and beverages at the pantry. Medical expenses

7,500 8,000

50,000

Interest income from a company resident in Country A. The interest income, was subject to 10% withholding tax in Country A. The highest corporate tax rate in Country A is 20%. The interest was used to purchase a sculpture in Italy. The sculpture arrived in Singapore on 1 November 2019.

9,000

267,000 550,000

20,000

30,000 2,300,000 250,000 100,000

50,000 5,600

Legal fees: - Settlement of complaints from customers for defective phones. - Income Tax appeal for Year of Assessment 2019. - Tenancy agreement for new retail space.

11,000 10,000 5,000

SGPTAX/Feb2021/MainEQP(online)

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The company implemented the Portable Medical Benefits Scheme (PMBS) since its incorporation. Reimbursement of private car expenses to employees for business travels.

Cash donations made to Salvation Army, an Institution of Public Character. Interest expense incurred on hire purchase for vans (see note 2 under additional information)

Additional information:

49,000 7,000

5,000 4,000

Renovation expenses for new retail space: - Electrical installation and wiring. - Laminated flooring. - Automated roller shutters. - Interior designer fees. (see further information in note 1 under additional information)

45,000 20,000 7,000 5,000

1. ZPL incurred its first renovation expenditure qualifying for S14Q of the Income Tax Act amounting to $150,000 in the Year of Assessment 2018. There was no such renovation for the Year of Assessment 2019.

2. The vans were bought under hire purchase. The total purchase price of the vans is $450,000, including an interest component of $144,000. The capital and interest payment are to be settled in thirty six (36) fixed monthly instalments, payable on the last day of each month. The first payment was due on 31 October 2018.

3. Non-Current Assets Account The following were capitalised in the non-current assets account:

Cutting machine Assembly equipment 100 laptops at $1,000 each

Purchased on 1 May 2016 2 February 2017 3 March 2019

$ 2,400,000

45,000 100,000

4. It is the companys policy to claim maximum capital allowances on its eligible plant and machinery, where applicable.