NIzas Development, a partnership in the property development business, is owned by Niza and Iza. The business
Question:
NIzas Development, a partnership in the property development business, is owned by Niza and Iza. The business has two ongoing projects concurrently. Project A is expected to be completed by 2021 and Project B by the fourth quarter of 2022. The following information is provided by the partnership:
Total estimated profit of the projects:
Project A RM43,200
Project B RM55,880
The total cost of the projects:
Project A RM34,400
Project B RM78,600
Payment received and receivable:
2019 | 2020 | 2021 | 2022 | |
Project A | 30,300 | 35,800 | 11,500 | - |
Project B | 48,950 | 48,880 | 21,100 | 15,550 |
REQUIRED:
Compute the estimated gross profit for each relevant year of assessment of the two projects.
2. Based on the information in (A) above, in the year 2020, there is a variation in the development cost in respect of Project B. Accordingly, the increment of RM4,400 in the total cost resulted in a change in the estimated gross profit.
REQUIRED:
Discuss tax implication and treatment due to the increment of the total cost on the estimated gross profit for each year of Project B. Justify your answer and support with workings.
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick