Reference no: EM133041884
QUESTION - Anggerik Merah Bhd. commenced operations on January 1, 2019. The following is the information relating to its assets and liabilities as at 31 December 2019 and 2020:
|
|
2020 (RM)
|
2019 (RM)
|
|
Security Alarm System
|
48,000
|
48,000
|
|
Accumulated Depreciation - Development Cost Security
|
19,200
|
9,600
|
|
Alarm System
|
45,000
|
50,000
|
|
Interest Receivable
|
4,000
|
6,000
|
|
Dividends Not Received
|
0
|
35,000
|
|
Warranty Liability
|
48,000
|
96,000
|
|
Unearned Service Revenue
|
18,000
|
0
|
Additional information:
i) The security alarm system was completed on 1 January 2019. The system is depreciated using the straight line method over 5 years. For taxation purposes, the capital allowance for 2019 and 2020 is RM19,200 and RM9,600 respectively.
ii) Development costs were capitalized on 31 December 2019 and amortized over 10 years. For tax purposes, development costs are allowed to be deducted in the year the payment is made.
iii) For tax purposes, interest proceeds will be taxed in the period in which they are received.
iv) In 2019, the company recognized a Warranty Liability of RM96,000. For tax purposes, warranty expenses are claimable in the period they are paid. In 2020, the actual warranty claimed by customers amounts to RM48,000.
v) Dividend proceeds are tax exempt.
vi) Unearned service revenue has been accounted for as taxable income in 2020.
vii) Taxable income of Anggerik Merah Bhd. for 2019 and 2020 are RM529,000 and RM510,000 respectively.
viii) The income tax rate for 2019 and 2020 is 24%.
Be required: Refer to MFRS 112 Income Taxes;
a) Specify the amount:
i) deferred tax liabilities as at 31 December 2019 and 2020.
ii) deferred tax assets as at 31 December 2019 and 2020.
iii) tax expenditure for 2019 and 2020.
b) Prepare journal entries to record tax expenditure for 2019 and 2020. (4 marks)
c) Identify ONE (1) permanent difference items for 2019 and its effect on taxes in that year. (2 marks)
d) If there is a reduction in the tax rate in 2020 from 24% to 23%, explain the effect on the temporary difference in 2019 if; i) The new tax rate has been gazetted in 2019 ii) The new tax rate has not been gazetted in 2019.