The following is the financial report and the declaration by XYZ co. As of 2021-2022.

Reported income of the year as per the published financial statements is KD1.8 million.

Upon inspection, the following remarks were obtained:

The Co. Did not report capital gains resulting from the sale of heavy machine which is recorded at book value KD250,000 and was subject to annual depreciation @25%, while the allowable rate is 12% maximum. The inspector determined a profit rate of not less than 7%.

The company carried forward a sum of KD450,000 net brokerage earnings for next year for conservatism purpose.

A provision against market value fluctuations of shares portfolio has been taken at 5% while the permitted is 2%. The portfolio market value at the year-end is KD750,000.

Retention allowance was not allocated like last year which amounted KD27500.

The board of directors' remunerations of KD130,000 was added to operating expenses.

Required:

Prepare the inspection report for the year ending 2021-2022. What shall be the tax liability for the year @ tax rate of 20%?

Answer rating: 100% (QA)

Inspection Report for the Year Ending 20212022 Capital Gains from Sale of Heavy Machine The company did not report the capital gains resulting from th... View the full answer