Week 11

Question 1
One Glove Sdn. Bhd. is one of the largest manufacturers of gloves in Malaysia. The paid-up share capital of
the company as at 1 July 2020 was RM20 million. Mr. Chong is the founder of the company and he owns 30 %
of the company’s shares.

The company’s income statement for the year ended 30 June 2021 is as follows:

Notes RM'000 RM'000

Turnover 32,800
Less: Cost of goods sold 1 10,300
22,500
Add: Other income 2 3,400
25,900
Less: Expenses:
Advertising and promotion 3 330
Bank loan interest 4 3,000
Professional fees 5 1,392
Staff benefits 6 15,364
Miscellaneous 7 289
Business travelling expenses 655
21,030
Profit before taxation 4,870

N
o
1. t Cost of goods sold
e This includes: RM’000
s Depreciation of assets 5,450
: Raw materials used in an approved research project premium 225
Insurance paid for insuring imported raw materials 240
Unrealised foreign exchange loss for the purchases of raw materials 32

2. Other income
RM’000
Compensation under a restrictive covenant from a competitor 150
Fixed deposit interest income 2,050
Rental income from a warehouse in Malacca (The maintenance and support 1,200
services have been actively and comprehensively provided on this property)
3,400

3. Advertising and promotion

RM’000
Advertisements in newspapers 130
Donation of gloves to the Ministry of Health (Note) 200
330
Note: The market value of the gloves donated is RM500,000.
4. Bank loan interest
The company is undertaking an expansion project in view of the huge demand for its products. The
bank loan interest is in respect of a bank loan of RM50 million to finance the following:

RM’ Million

Installation of new production lines 10

Acquisition of a competitor, a glove manufacturer (still in the planning stage) 40
50

5. Professional fees
RM’000
Tax due diligence fee for the acquisition of a glove manufacturer 60
Statutory audit fee 32
Renovation costs on factories (see Note 8) 1,300
1,392

6. Staff benefits
RM’000
Salaries and wages 14,200
Leave passages to Sabah for performing staff 24
Construction of childcare centre (see Note 8) 250
Staff training costs (Note) 890
15,364
Note:
This amount included practical training cost of RM60,000 in relation to the
company’s business. It was provided to non-employees who are tax residents.

7. Miscellaneous
RM’000
Entertainment on launching of new products 15
Annual general meeting expenses 42
Maintenance expenses of the warehouse in Malacca (see Note 2) 192
Lease rental of machineries 40
289

8. Additional information:
RM’000
Current year capital allowances and industrial building allowance (Note) 2,650

Note:
This amount excluded capital allowances for qualifying capital expenditure in
the above Income Statement.
Required:

(a) Compute the tax payable of One Glove Sdn. Bhd. for the year of assessment 2021. You are to
indicate ‘nil’ in your computation for every item that does not require any tax adjustment.
(18 marks)

(b) Explain the income tax treatment for the following income and expenses:

(i) Rental income and its related expenses from the warehouse in Malacca (Note 2 & 7);
(4 marks)

(ii) Donation of gloves to the Ministry of Health (Note 3); (2 marks)

(iii) Bank loan interest (Note 4); (2 marks)

(iv) Renovation costs on factories (Note 5); (2 marks)

(v) Cost of practical training provided to non-employees (Note 6). (2 marks)

[Total: 30 marks]