Bumi Minda Sdn Bhd (BMSB) closes its account on 31 December every year. It had obtained...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Bumi Minda Sdn Bhd (BMSB) closes its account on 31 December every year. It had obtained an overdraft facility of RM400,000 from Maybank for use in its business in December 2020. BMSB bought 1,000 units of TNB shares and 5,000 units of Telekom shares on 5 January 2021. BMSB also purchased a terrace house and a shop house in February 2021. BMSB received income from the investments in 2021 as follows: TNB Telekom Bhd Total Shares Terrace house Shop house Total a Property b.. Units 1,000 5,000 6,000 Cost (RM) 100,000 160,000 260,000 Cost (RM) 10,000 30,000 40,000 Rental Received (RM) 12,000 24,000 36,000 Dividend (RM) 2,000 Nil 2,000 BMSB claimed an interest expense of RM40,000 in its profit and loss account for the year of assessment 2021. As the company could not justify that the purchase of investments was not financed from the overdraft, the amount of interest expense deductible against the gross income from its business must be restricted. Required: Revenue Expenses (RM) 1,000 2,500 3,500 Advise BMSB on the deductibility of RM40.000 interest expense. Support your answer with a computation of the restricted interest expense. (4 marks) Advise the company on the tax treatment of interest expense for each investment source. Support your answer by providing the computation of Statutory Income. Bumi Minda Sdn Bhd (BMSB) closes its account on 31 December every year. It had obtained an overdraft facility of RM400,000 from Maybank for use in its business in December 2020. BMSB bought 1,000 units of TNB shares and 5,000 units of Telekom shares on 5 January 2021. BMSB also purchased a terrace house and a shop house in February 2021. BMSB received income from the investments in 2021 as follows: TNB Telekom Bhd Total Shares Terrace house Shop house Total a Property b.. Units 1,000 5,000 6,000 Cost (RM) 100,000 160,000 260,000 Cost (RM) 10,000 30,000 40,000 Rental Received (RM) 12,000 24,000 36,000 Dividend (RM) 2,000 Nil 2,000 BMSB claimed an interest expense of RM40,000 in its profit and loss account for the year of assessment 2021. As the company could not justify that the purchase of investments was not financed from the overdraft, the amount of interest expense deductible against the gross income from its business must be restricted. Required: Revenue Expenses (RM) 1,000 2,500 3,500 Advise BMSB on the deductibility of RM40.000 interest expense. Support your answer with a computation of the restricted interest expense. (4 marks) Advise the company on the tax treatment of interest expense for each investment source. Support your answer by providing the computation of Statutory Income.
Expert Answer:
Answer rating: 100% (QA)
a Advise BMSB on the deductibility of RM40000 interest expense Support your answer with a computation of the restricted interest expense The deductibi... View the full answer
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
Posted Date:
Students also viewed these mathematics questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
1. Anne is employed as a chief financial officer in Bee Sdn Bhd. Anne is entitled to leave passage benefits as per her employment contract. In January 2021, she went to Korea as part of her leave...
-
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2015. Goddard decided to change to the average cost method for determining inventory costs at the...
-
Javadi Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes predetermined overhead rates on a quarterly basis...
-
Give a combinatorial argument to verify that for all n Z+, (For each 1 k n, dk = the number of derangements of 1, 2, 3, . . . , k; d0 = 1.) In k-
-
Familiarize yourself with the California Code of Civil Procedure and the California Rules of Court at www.courts.ca.gov/.
-
7-B1 Prepare Master Budget Flying Fish Kite Company, a small Woy Woy, Australia, firm that sells kites on the Web, wants a master budget for the 3 months beginning January 1, 20X2. It desires an...
-
1) Draw the graph of the following relation and state the domain and range. 5, =] x+3, -2
-
A storeroom is used to organize items stored in it on N shelves. Shelves are numbered from 0 to N-1. The K-th shelf is dedicated to items of only one type, denoted by a positive integer A[K]....
-
Research scholarships that fit your personal profile and estimate your potential financial aid. Then you will analyze the results of your research and explain your plan for achieving all the aid you...
-
Alice earns $15.10 per hour and works 37.5 regular hours per weekly pay period. In addition, Alice worked 2.0 overtime hours this pay period, which are paid at 1.5 times her regular hourly rate. She...
-
Automobile demand has fallen during a recent recession, and Ana has been laid off from her job on the assembly line. Rajiv recently lost his job as a waiter at a local restaurant. A recent increase...
-
1. If an economy has a budget surplus of 400, private savings of 1,200, and investment of 1,600, what will the balance of trade in this economy equal? 2. If there is shortage of loanable funds, then...
-
Government spending as a fiscal policy tool is used to: A) ?Decrease the national debt B) ?Directly stimulate economic activity by increasing demand C) ?Reduce inflation D) ?Lower interest rates
-
Alex's Rose Shop makes up bouquets and clarges for the vase, plus a cost per rose. The shop charges $32.85 for a botquet of 12 roses. The shop charges $50.85 for a bouquet of 20 roses. What does...
-
Discuss? Not going to a study session, but spending time playing a video game could be considered an Opportunity Cost.
-
What kind of financial pressures can an LBO cause?
-
The statements of financial position of Mars plc and Jupiter plc at 31 December 20X2 are as follows: Statements of comprehensive income for the year ended 31 December 20X2 Mars acquired 80% of the...
-
Sunhats Ltd manufactures patent hats. It carries inventor y of these and sells to wholesalers and retailers via a number of salespeople. The following expenses are charged in the profit and loss...
-
You work for Euroc, a limited liability company, which seeks growth through acquisitions. You are a member of a team that is investigating the possible purchase of Choggerell, a limited liability...
-
Fill in the Blank. In a random process, the outcome of an experiment will be a function of some _________ such as time.
-
What is the covariance between two random variables \(X\) and \(Y\) ?
-
The joint density function of two random variables \(X\) and \(Y\) is given by \[p_{X, Y}(x, y)= \begin{cases}\frac{x y}{9}, & 0 \leq x \leq 2,0 \leq y \leq 3 \\ 0, & \text { elsewhere }\end{cases}\]...
Study smarter with the SolutionInn App