Question
Subang Electronics Sdn Bhd (the company) is a Malaysian resident company in the business of manufacturing of electrical appliances in Bandar Sunway. The share capital
Subang Electronics Sdn Bhd ("the company") is a Malaysian resident company in the business of manufacturing of electrical appliances in Bandar Sunway. The share capital of RM20 million of Subang Electronics Sdn Bhd is fully owned by Malaysians. The company's income statement for the year ended 30 June 2018 is as follows:
Note RM'OOO RM'OOO
Sales 76,900
Less: Cost of sales 1 (46,573)
30,327
Add: Other income 2 555
30,882
Less: Expenses
Remuneration 3 8,960
Professional fees 4 47
Advertising 5 54
Entertainment expenses 6 72
Interest 7 124
Bad debts 8 130
Lease rental 9 97
Repairs and maintenance 10 180
Foreign exchange loss 11 89
Fines and penalties 12 22
Donations 13 265
Insurance 14 124
Research and development 15 636
Depreciation 200 (11.000)
Net profit before tax 19,882
Notes:
1, Cost of sales includes:
(i)Electrical appliances costing RM50,000 were donated to an approved institution on 4 May 2018. The normal selling price of the appliances is RM70,000.
(ii)The company's warehouse was broken into and an estimated RM40,000 worth of electrical appliances were stolen. An insurance recovery of RM35,000 was received and this was netted off against the insurance charges debited to the income statement (see Note 14).
2.Other income consists of:
(i)Rent of RM180,000 derived from a property in Indonesia and received in Singapore and credited to the bank account in Singapore in July 2018.
(ii)Single tier dividends amounting to RM75,000 received from a Malaysian public listed company during the basis period.
(iii)One of its many outlets selling its products terminated its contract expiring in June 2020 and paid RM300,000 as compensation for breach of contract.
3.Remuneration includes:
(i)Entertainment allowances totalling RM440,000 paid to the managing director and the marketing manager.
(ii)Contribution of RM71 ,400 to an unapproved provident fund.
(iii)Salaries amounting to RM48,000 paid to three employees certified as disabled.
(iv) Expenses of RM17,000 for recruiting employees.
4.Professional fees comprise the following:
RM
Legal fees on compensation for unfair dismissal of an employee 8,500
Non-trade debt collection expenses 2,500
Accounting and auditing fees 16,000
Secretarial fees 5,000
Feasibility study for expansion of operations in Indonesia 15,000
47,000
5.Advertising
The company owns the Malaysian brand of electrical appliances. The Malaysian brand is registered as a trademark in Malaysia. The branded goods are of export quality. The company advertised its branded goods through the local newspapers and travel catalogues,
6.Entertainment expenses comprise:
RM
Hampers for customers during festive occasions 4,000
Staff lunches and refreshments 1 6,000
Promotional gifts (company's own products) 7,000
Disbursement of promotion team's entertainment expenses 45,000
72,000
7.Interest
The company had borrowed money to invest in shares from which the dividend income was derived. The interest charges on the loan to finance the investment amounted to RM34/000. The balance of interest was incurred on the overdraft facility used to finance working operations.
8.Bad debts
General Specific Total
(RM) (RM) (RM)
Balance as at 1 July 2017 420,000 140,000 560,000
Add: Provision for the year 90,000 I OO,OOO 190,000
Less: Amount written off (30,000) (30,000) (60,000)
Balance as at 30 June 2018 480,000 210,ooo 690,000
Note: The bad debts were in respect of trade debtors.
9.Lease charges are in respect of three company motor vehicles:
Motor vehicle Cost of vehicle when new Lease charges for year ended 30 June
(RM) 2016(RM) 2017(RM) 2018(RM)
Peugeot 2.4 L (saloon) 170,000 18,000 28,000 29,000
Mercedes 350 (saloon) 350,000 24,000 52,000 54,000
Nissan (van) 95,000 22,000 23,000 14,000
10.. Repairs and maintenance comprise the following
RM
Installation of security alarm system 25,000
Replacement of component parts of factory machinery 5,000
Repainting of factory premises 30,000
Modification of administration block to provide access for disabled employees 120,000
180,000
l l . Foreign exchange loss consists of:
RM
Unrealized loss from sale of goods 49,000
Realized loss from purchase of machinery 40,000
89.000
12. Fines and penalties comprise:
RM
Fines and compounds for traffic offences 15,000
Penalty for late payment of income tax to the IRB 7,000
22,000
13. Donations made during the year by the company:
RM
Scholarships for students studying in vocational institutions in Malaysia 30,000
Sponsoring a local cultural show approved by the Ministry of Unity, 20,000
Culture, Arts and Heritage
Cash donation to a public university library to improve its facilities 115,000
Cash donation to an approved institution 100,000
265,0000
14.Insurance payments include:
(i) Export credit insurance premiums of RM48,000 paid to a Malaysian takaful-based export credit insurance company for the export of electrical appliances to Singapore and Indonesia. (ii) Insurance for company's motor vehicles, stocks and buildings.
(iii) Premium of RM22,000 on a term policy taken out on the life of the managing director. The key-man policy was taken to insure the company against loss of profits in the event of his death.
The insurance recovery mentioned in Note 1 has been set off against the sum charged to the income statement.
15.Research and development expenditure comprises:
RM
Cost of fixtures and equipment72,000
Operating costs564,000
636,000
The research conducted by the company has the approval of the Minister of Finance.
16.The following information was provided for YA 2018:
RM
Capital allowance for the year (including the new security alarm 103,000
system expensed to the income statement and cost of fixtures and
equipment used in the research and development program)
Business loss brought forward from previous year. 42,000
The company incurred capital expenditure during the year on plant and machinery which qualified for an investment tax allowance of RM230,000.
Compute the tax payable for Subang Electronic Sdn Bhd for YA2018
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started