Northern Digital Sdn Bhd (Northern) is a technology-based company specializing in producing micro-processor-based products in Malaysia....
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Northern Digital Sdn Bhd (Northern) is a technology-based company specializing in producing micro-processor-based products in Malaysia. Northern is a resident company and was incorporated in 2019 with a paid-up capital of RM2.4 million. The accounts are closed on 31 December every year. The following financial information is available for the period ended 31 December 2021: Northern Digital Sdn Bhd Statement of Comprehensive Income for the year ended 31 December 2021 Note RM Sales Less: Cost of sales Gross profit Add: Other gross incomes Promotion Dividend Rental Compensation Profit sharing from partnership Less: Expenses Salaries, allowances and sponsorship Legal and professional fees Marketing and distribution Entertainment expenses Travelling expenses Listing expenses Interest payment Repairs and maintenance Donations Depreciation of property, plant and equipment Net profit before taxation Less: Taxation Net profit after taxation 1 1 2 HH69L945E 10 200,000 80,000 54,000 16,000 1,500,000 680,000 50,000 120,000 10,000 20,000 55,000 36,500 380,000 90,000 20,000 RM 8,688,000 (3,883,000) 4,805,000 1,850,000 (1,461,500) 5,193,500 (1,204,440) 3,989,060 Notes: 1. 2. 3. 4. 5. 6. Cost of sales include the cost of information technology gadgets provided to the employees for the flexible working arrangement (work from home). The gadgets were: RM i. Smartphones 11. Personal computer iii. Web camera Other incomes comprise of: i. Special promotion during 'Warehouse Clearance' day ii. Dividend received from Fast Network Ltd, a Korean investment company iii. Rental income derived from Mega Residential Property situated in Malaysia iv. Compensation received from insurance company for late delivery of goods to customer during COVID-19 lockdown v. Northern entered into a partnership agreement with Western Technology Sdn Bhd (Western) to form IT Partnership Solution. The profit-sharing ratio between Northern and Western is 60:40. In the year 2021, the partnership recorded a profit before tax of RM2.5 million, which included renovation costs of RM50,000 on the business premise Salaries, allowances and sponsorship comprise of: i. Salaries of full-time employees ii. Salaries of two (2) part-time sales consultants aged 65 years old iii. Employees Provident Fund iv. Professional training (Protégé Ready to Work Program) approved by the Ministry of Entrepreneur Development and Cooperatives (MEDAC) V. Repayment of Educational Loan of Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) on behalf of its employees vi. Scholarship to employees' children pursuing study at degree level Legal and professional fees include: i. Cost of defending legal proceedings brought by former employees claiming unjust dismissal ii. Tax filing fees iii. Secretarial fees iv. Statutory audit Marketing and distribution comprise of: i. Souvenirs distributed at an approved international trade fair in Singapore to promote the company's products IKEA gift voucher for staff during annual dinner ii. Gifts of laptops to B40 families to support e-learning during COVID- 19 pandemic iv. Two new advertisement billboards displayed on the highway 20,000 50,000 10,000 111. 2 RM 400,000 50,000 90,000 70,000 30,000 40,000 22,000 28,000 30,000 40,000 Entertainment expenses incurred from annual general meeting held in December 2021 which was attended by 80 shareholders. The expenses include: RM 12,000 9,000 10,000 15,000 RM i. Printing of directors' report and statement of account Lunch for 80 shareholders and 20 employees of the company ii. 7. Travelling expenses include annual leave passage for employees to Langkawi amounting to RM15,000 9. 8. Listing expenses incurred in listing the company's share in the Access, Certainty, Efficiency (ACE) market of Bursa Malaysia Securities Bhd, which comprise of: i. 11. Processing fees Advisory fee 111. iv. Interest payment consists of: i. Interest on loan taken to invest in Fast Network Ltd ii. Interest expense to finance investment in Mega Residential Property iii. Interest on loan for working capital iv. Commitment fee charged on the loan by local bank Additional information: i. Current year capital allowances ii RM 2,000 4,500 10. Repairs and maintenance include renovation and refurbishment of business premise amounting to RM3 10,000 11. Donation consists of: i. Cash contribution amounting RM50,000 to a non-governmental organization for the maintenance and conservation projects on heritage buildings designated by the National Heritage Department under the National Heritage Act 2005 ii. Contribution in kind (equipment and goods) worth RM40,000 for COVID-19 Fund (Tabung COVID-19) which approved by Ministry of Health Capital allowances brought forward Unabsorbed business loss Payment of business zakah in current year REQUIRED: RM 30,000 25,000 RM 8,000 11,000 15,000 2,500 3 RM 17,000 3,000 150,000 300,000 Compute the tax liability for Northern Digital Sdn Bhd for the year of assessment 2021. Show all relevant tax adjustments. (Note: Your answer must list every item stated in the income statement and notes. Indicate with 'NIL' where no adjustment is necessary). Northern Digital Sdn Bhd (Northern) is a technology-based company specializing in producing micro-processor-based products in Malaysia. Northern is a resident company and was incorporated in 2019 with a paid-up capital of RM2.4 million. The accounts are closed on 31 December every year. The following financial information is available for the period ended 31 December 2021: Northern Digital Sdn Bhd Statement of Comprehensive Income for the year ended 31 December 2021 Note RM Sales Less: Cost of sales Gross profit Add: Other gross incomes Promotion Dividend Rental Compensation Profit sharing from partnership Less: Expenses Salaries, allowances and sponsorship Legal and professional fees Marketing and distribution Entertainment expenses Travelling expenses Listing expenses Interest payment Repairs and maintenance Donations Depreciation of property, plant and equipment Net profit before taxation Less: Taxation Net profit after taxation 1 1 2 HH69L945E 10 200,000 80,000 54,000 16,000 1,500,000 680,000 50,000 120,000 10,000 20,000 55,000 36,500 380,000 90,000 20,000 RM 8,688,000 (3,883,000) 4,805,000 1,850,000 (1,461,500) 5,193,500 (1,204,440) 3,989,060 Notes: 1. 2. 3. 4. 5. 6. Cost of sales include the cost of information technology gadgets provided to the employees for the flexible working arrangement (work from home). The gadgets were: RM i. Smartphones 11. Personal computer iii. Web camera Other incomes comprise of: i. Special promotion during 'Warehouse Clearance' day ii. Dividend received from Fast Network Ltd, a Korean investment company iii. Rental income derived from Mega Residential Property situated in Malaysia iv. Compensation received from insurance company for late delivery of goods to customer during COVID-19 lockdown v. Northern entered into a partnership agreement with Western Technology Sdn Bhd (Western) to form IT Partnership Solution. The profit-sharing ratio between Northern and Western is 60:40. In the year 2021, the partnership recorded a profit before tax of RM2.5 million, which included renovation costs of RM50,000 on the business premise Salaries, allowances and sponsorship comprise of: i. Salaries of full-time employees ii. Salaries of two (2) part-time sales consultants aged 65 years old iii. Employees Provident Fund iv. Professional training (Protégé Ready to Work Program) approved by the Ministry of Entrepreneur Development and Cooperatives (MEDAC) V. Repayment of Educational Loan of Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) on behalf of its employees vi. Scholarship to employees' children pursuing study at degree level Legal and professional fees include: i. Cost of defending legal proceedings brought by former employees claiming unjust dismissal ii. Tax filing fees iii. Secretarial fees iv. Statutory audit Marketing and distribution comprise of: i. Souvenirs distributed at an approved international trade fair in Singapore to promote the company's products IKEA gift voucher for staff during annual dinner ii. Gifts of laptops to B40 families to support e-learning during COVID- 19 pandemic iv. Two new advertisement billboards displayed on the highway 20,000 50,000 10,000 111. 2 RM 400,000 50,000 90,000 70,000 30,000 40,000 22,000 28,000 30,000 40,000 Entertainment expenses incurred from annual general meeting held in December 2021 which was attended by 80 shareholders. The expenses include: RM 12,000 9,000 10,000 15,000 RM i. Printing of directors' report and statement of account Lunch for 80 shareholders and 20 employees of the company ii. 7. Travelling expenses include annual leave passage for employees to Langkawi amounting to RM15,000 9. 8. Listing expenses incurred in listing the company's share in the Access, Certainty, Efficiency (ACE) market of Bursa Malaysia Securities Bhd, which comprise of: i. 11. Processing fees Advisory fee 111. iv. Interest payment consists of: i. Interest on loan taken to invest in Fast Network Ltd ii. Interest expense to finance investment in Mega Residential Property iii. Interest on loan for working capital iv. Commitment fee charged on the loan by local bank Additional information: i. Current year capital allowances ii RM 2,000 4,500 10. Repairs and maintenance include renovation and refurbishment of business premise amounting to RM3 10,000 11. Donation consists of: i. Cash contribution amounting RM50,000 to a non-governmental organization for the maintenance and conservation projects on heritage buildings designated by the National Heritage Department under the National Heritage Act 2005 ii. Contribution in kind (equipment and goods) worth RM40,000 for COVID-19 Fund (Tabung COVID-19) which approved by Ministry of Health Capital allowances brought forward Unabsorbed business loss Payment of business zakah in current year REQUIRED: RM 30,000 25,000 RM 8,000 11,000 15,000 2,500 3 RM 17,000 3,000 150,000 300,000 Compute the tax liability for Northern Digital Sdn Bhd for the year of assessment 2021. Show all relevant tax adjustments. (Note: Your answer must list every item stated in the income statement and notes. Indicate with 'NIL' where no adjustment is necessary).
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International Business and the New Realities
ISBN: 978-0136090984
2nd Edition
Authors: S. Tamer Cavusgil, Gary Knight, John R. Riesenberger
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