Dach Leardy Sdn Bhd, a food manufacturer in Seremban, incurred the following expenditures during financial year ended 31 August 2020:

1. Cost of constructing hostel for the factory workers amounting to RM75,000. A bigger apartment unit for the operation manager is constructed for RM30,000.

2. Expenditure spent on construction of R&D laboratory to enhance food technology, amounting to RM45,000. Nonetheless, the lab is partially ready and requires another cost of RM35,000, which is expected to complete by March 2021. This research work is approved by the minister.

3. A machinery cost RM90,000 was incurred to increase production capacity. To accommodate the machinery installation, a renovation to the factory building was required, which costs RM120,000.

4. A two-storey building is constructed for child care center for the employees cost RM170,000. Half of the space area on the first floor is used for company’s administration office.

5. A unit of shoplot house was rented in the Putrajaya city at an annual cost of RM21,000 for storage of goods and easier distribution to retailer. A renovation worth RM15,000 was incurred.

Required:

i. Determine the qualifying building expenditures for each of the expenditures incurred. Briefly explain the reason for items that are not qualified.

ii. Calculate the industrial building allowance and residual expenditure for each qualified expenditure, and total IBA eligible to be claimed by Dach Leardy Sdn. Bhd. in YA2020

Answer rating: 100% (QA)

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