During the year AKT traded very well given the economic conditions. However some customers could not pay
Question:
During the year AKT traded very well given the economic conditions.
However some customers could not pay their invoices to AKT and one large customer offered to provide a second hand 5 tonne truck as payment for the invoice. The amount owing on the invoice was $15,500. The current market value of the truck was $14,000.
As the accountants to the company, you advised the company to make provisions in the financial statements for the following:
- 1. Annual leave for the staff $12,000
- 2. Bad and Doubtful debts $18,000
During the year the directors advised that only $8,000 of annual leave was paid and the actual debts considered to be bad and uncollectible was only $7,200.
Being the CEO of the company Akhtar believed that the company should acquire for his benefit a Telsa Model 3. The cost was $223,000 (including the COE). The running costs for the care was $15,000. The car was acquired on 9 February 2024.
Kat was happy to use public transport and Grab when she needed to get around Singapore.
Issues they seek advice on:
- 1. How is the payment of the invoice of $15,500 treated when no cash was received? How is the difference between the $15,500 and the $14,000 treated?
- 2. Explain how the two amounts of provisions are dealt with under the Income Tax Act and what amount if any is allowable as a deduction?
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr