Sepakat Bhd (Sepakat) is a manufacturing company, incorporated in Malaysia since year 2014. The following information are extracted from the financial accounting record of Sepakat for the year ended 31 December 2018.

1. During the year, depreciation expense and capital allowance for plant were RM800,000 and RM890,000 respectively. At the end of the year, the carrying amount of plant was RM6,100,000 and tax written down was RM3,680,000.
2. A research and development cost amounted to RM2,000,000 incurred during year 2018. Sepakat capitalises product development cost and amortises them over the expected useful lives of the products. Amortisation of product development cost for year 2018 was RM600,000. As at 31 December 2017 and 2018, the product development cost (intangible asset) were RM4,000,000 and RM5,400,000 respectively. Current tax laws allows all research and development costs to be written off immediately in computing taxable profit.
3. Sepakat maintains a provision for warranty costs in relation to warranties given for products sold. The balances in the provision account as at 31 December 2018 was RM3,300,000.
4. As at 31 December 2017 and 2018, accrued interest expenses were RM800,000 and RM900,000 respectively. Interest expenses are allowable for income tax purpose when paid. Interest paid in 2018 was RM800,000.
5. A donation of RM500,000 was made to Inland Revenue Board’s unapproved institution.
6. The taxable profit for the year ended 31 December 2018 was RM2,430,000.
7. Corporate tax rate for 2017 and 2018 were 24%.
8. The balance of deferred tax liability on 1 January 2018 was RM790,000.

REQUIRED:

1. Prepare a table showing the carrying amounts and tax base for each of the above items as at 31 December 2018. Calculate the temporary difference and indicate whether the temporary difference is taxable or deductible.

Calculate the amount of tax expense as charged in the Statement of Profit or Loss and Other Comprehensive Income. Prepare the necessary journal entry.

Prepare an extract of the Statement of Financial Position as at 31 December 2018 related with taxation.

Briefly explain the method applied in the MFRS 112 Income Taxes to calculate deferred taxes.

Answer rating: 100% (QA)

The method for computing the deffered tax in accordance with MFRS 12 Income shall be as follows 1 In... View the full answer