Tenfeet Sdn Bhd. a company with a paid-up ordinary share capital of RM2 million, is in the business of shoe making. The company’s profit or loss account for the year ended 30 April is as follows: Note RM'000 RM'000 Sales 1 9,744 Less: Cost of sales 2 3,224 6,520 Add: Gain on sales of machinery 2 15 Fixed deposit interest 30 6,565 Less: Staff remuneration 3 2,895 Repairs and maintenance 4 288 Lease rentals 5 168 Insurance premiums 6 31 Retirement gratuities 7 420 Foreign Exchange (net) 8 430 Donations 9 204 Financial expenses 10 213 Legal fees on the purchases of a storage building 13 Depreciation 94 4,756 Profit before taxation 1,809 Notes:

(1) Sales includes RM3,000 for late-payment interest received from trade debtors.

(2) Cost of sales includes a sum of RM274,000 paid to a distributor to terminate his contract, which had become onerous. Fixed deposit interest is in respect of fixed deposit pledged with a local bank for banking facilities.

(3) Staff remunerations includes:

(i) Entertainment allowance amounting to RM200,000 paid to marketing personnel to enable them to entertain the company’s clients.

(ii) Employees Provident Fund Contributions: The rate of contributions for senior management staff is 21% in respect of total remunerations of RM300,000. For marketing personnel, the rate of contributions is 12%.

(iii) The conduct of the marketing executive was detrimental to business of the company. The company therefore required him to retire and agreed to pay him compensation of RM120,000 in two annual instalments of RM60,000 each. Only the first installment paid in February 2019 was included in the profit and loss account of Tenfeet.

(4) Repairs and maintenance includes a sum of RM66,000 incurred on repairs to the storage building purchased in December 2018 for the storage of raw material. These extensive repairs were carried out immediately after the purchases.

(5) TSB leased three motor cars for its executives. The first lease commenced in February 2018 at RM5,000 per month, the second commenced in August 2018 also RM5,000 per month and the third leased commenced in October 2018 at RM9,000 per month. Cost of motor car leased are: Lease Cost of car RM First 165,000 Second 145,000 Third 250,000

(6) Insurance premiums include export credit insurance premiums of RM22,000 paid to an insurance company approved by Minister (Malaysia Export Credit Insurance Berhad).

(7) Retirement gratuities include a provision of RM27,000

(8) The foreign exchange loss (net) comprise the following:

RM

Realised loss (on settlements of amounts due for stocks acquired) 192,000

Realised loss (repayment of loan) 240,000

Unrealised loss (on settlement of trade debts) 120,000

Unrealised gain (on amounts due for purchased of stock) (122,000)

430,000

(9) RM Cash donation to temples 180,000 Donation of furniture to schools 24,000 204,000

(10) Financial expenses comprised: RM Bank overdraft interest 180,000 Finance lease interest of machinery 33,000 213,000 Out of the bank overdraft of RM3 million, RM400,000 was used to invest in Ten Gram Sdn.Bhd. The company lease machinery during the year. Lease rental of RM200,000 was incurred during the year. The interest portion amounted to RM33,000 and the capital portion was capitalized in the company’s balance sheet.

(11) The following additional information was provided by the company: i. Current year capital allowance and capital allowances brought forward from year of assessment 2018 at RM316,000 and RM71,000 respectively. ii. Current year balancing charge amounted to RM10,000

(12) Tenfeet Sdn Bhd is 60% owned by Ten Ton Sdn Bhd, a company with ordinary share capital of RM10 million.

Required:

(a) Compute the tax payable by Tenfeet Sdn Bhd for the year of assessment 2019. Your computation should start with the figure of profit before taxation and follow the description used in the notes to the profit and loss account indicating “NIL” in the appropriate column for every item that does not require adjustment. 

(b) Explain your treatment of items referred in Notes 1 to 5, 8 and 10.