Permai Bhd is one of the main manufacturers and suppliers of industrial chemical products and equipment that had been incorporated in 2010. The following is the carrying amount of asset and liabilities of the company as at 31 December 2019: Carrying amount (RM) Property, plant and equipment 249,200 Intangible assets 138,000 Investment in fixed deposit 107,000 Account receivable 96,700 Interest receivable 10,700 Inventory 206,000 Bank 129,000 Trade payables 197,000 Accrued interest 15,600 Penalties payable 15,500 Unearned revenue 45,300 10% Loan 156,000 Additional information: 1. The cost of the property, plant and equipment is RM356,000 when it was acquired in 2015. Depreciation expense for property, plant and equipment is calculated at the rate of 10% per year and capital allowance is 20% per year for the first three years from the cost of the assets. 2. The intangible assets consist of development expenditure of Permai Bhd’s R&D project incurred during the year that was qualified to be capitalised. 3. Interest receivable is interest revenue earned from the investment in fixed deposit. 4. Meanwhile, interest expense was incurred due to a 10% loan from a financial institution. 5. Unearned revenue is payment received under a Permai Bhd’s policy that require new clients to make advance payments before the delivery of goods is made to them. 6. The balance of deferred tax liability on 1 January 2019 was RM8,500. The tax rate for the assessment year 2019 was 24%. REQUIRED: (a) Determine the tax base of asset and liabilities for Permai Bhd and calculate the temporary difference as at 31 December 2019. Indicate whether the temporary difference is taxable or deductible. (b) Compute the deferred tax expenses for 2019.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Permai Bhd is one of the main manufacturers and suppliers of industrial chemical products
and equipment that had been incorporated in 2010. The following is the carrying amount of
asset and liabilities of the company as at 31 December 2019:
Carrying amount (RM)
Property, plant and equipment 249,200
Intangible assets 138,000
Investment in fixed deposit 107,000
Interest receivable 10,700
Inventory 206,000
Bank 129,000
Trade payables 197,000
Accrued interest 15,600
Penalties payable 15,500
Unearned revenue 45,300
10% Loan 156,000
Additional information:
1. The cost of the property, plant and equipment is RM356,000 when it was acquired in
2015.
of 10% per year and capital allowance is 20% per year for the first three years from
the cost of the assets.
2. The intangible assets consist of development expenditure of Permai Bhd’s R&D project
incurred during the year that was qualified to be capitalised.
3. Interest receivable is interest revenue earned from the investment in fixed deposit.
4. Meanwhile, interest expense was incurred due to a 10% loan from a financial
institution.
5. Unearned revenue is payment received under a Permai Bhd’s policy that require new
clients to make advance payments before the delivery of goods is made to them.
6. The balance of
the assessment year 2019 was 24%.
REQUIRED:
(a) Determine the tax base of asset and liabilities for Permai Bhd and calculate the
temporary difference as at 31 December 2019. Indicate whether the temporary
difference is taxable or deductible.
(b) Compute the deferred tax expenses for 2019.
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