NY & Partners: Partnership Agreement Terms

Capital Contribution and Interest on Capital

NY & Partners has been established since 2015. The partnership business is currently owned by Nairn and Yusof. The following are the terms of partnership agreement:

      Naim                     Yusof

i. Capital contribution RM50,000 RM50,000

ii. Interest on capital(per annum)          5%                       5%

iii. Salary (per month)   RM2,000    RM2,400

iv. Profit/loss sharing ratio          1/3                        2/3

v. Personal expenses (per annum)   RM5,000    RM5,000

On 1 August 2019, Zakuan was admitted as a new partner. His capital contribution was RM45,000 and the interests on capital (per annum) is 5%, while his monthly salary is RM2,000. The new profit sharing ratio is 1:2:1 between Nairn, Yusof and Zakuan, while the others remain unchanged.

The provisional adjusted income for the year ending 31 December 2019 was RM158,000. The capital allowance (including unabsorbed capital allowance of RM5,000) was RM46,00

Additional information:

(i) Yusof received rental income of RM8,400 for the year of assessment 2019 and he made personal cash donation of RM21,000 to public school libraries.

(ii) The partnership donated RM5,000 to Rumah Orang Tua Danau (approved institution) on 15 November 2019.

Required:

Compute the total income for each partner for the year of assessment 2019.          (15 marks)

QUESTION 2 (INDUSTRIAL BUILDING ALLOWANCE CHAPTER)

BestAward Sdn Bhd (BASB) is in the business of manufacturing papers. BASB prepares its accounts to 31 July annually. The company has incurred the following expenditure for the purpose of its business.

(i) The company constructed a building at a cost of RM2,090,000. The building was used as a factory in May 2016. The details of the expenditure incurred are as follows:

Expenditure    RM

Cost of land 950,000

Legal fee for land acquisition   75,000

Architect's fees   35,000

Construction cost 400,000

Electrical wiring and plumbing     60,000

Fencing   20,000

Site preparation cost to install the plant 200,000

Cost of plant 350,000

Total                   2,090,000

(ii) In the year of assessment 2016, the company also bought a building costing RM750.000. The total built-up area of this building was 450,000 sq. feet. The building has been used for the following purposes:

  Living accommodation for factory workers 88%

  Administration office 6%

  Meeting rooms 6%

(iii) A new building was bought and put into use as a warehouse for the storage of raw materials on 30 April 2017. The cost of the building was RM620,000. It was located within the factory compound. Due to financial problem, the building was sold to JukeBook Sdn Bhd (accounting year end 30 September) for RM760.000 on 6 June 2018. JukeBook Sdn Bhd used the whole building as a factory.

Required:

Compute the industrial building allowances and balancing charges, if any, for both companies for all the relevant years of assessment up to year of assessment 2018.         (15 marks)

QUESTION 3 (RPGT CHAPTER)

Khairi transfered a 6 acre land to his wife Dilla for RM300,000 on 26 July 2015. Khairi incurred RM20,000 on land improvement. The market value of the house at the time of transfer was RM410,000. Khairi bought the land on 18 February 2014 for RM180,000. He incurred stamp duty of RM3,000 in connection with the purchase.

Dilla disposed the land on 23 October 2019 for RM620,000. Prior to disposal of the land, she incurred capital expenditure amounting of RM50,000 in order to enhance the value of the land. She also incurred RM5,000 on legal fees to defend the title of the land.

Required:

(i) State the RPGT position of Khairi on the disposal of his land to his wife, Dilla.   (5 marks)

(ii) Compute the RPGT payable by Dilla on the disposal of the land in October 2019.

           (8 marks)

QUESTION 4 (INDIRECT TAXES)

Wirajaya Sdn Bhd and Anova Sdn Bhd are both 100% wholly owned subsidiaries of  a public listed Company. Wirajaya imported taxable goods from an independent supplier at a purchase price of RM195,800 on 1 July 2019. Other expenses incurred on the goods were as follows:

   RM

Insurance   1,500

Freight   3,900

Import duty 37,000

The goods were sold to Anova on 5 September 2019 at cost inclusive of the above charges plus 10% mark up in line with the group's policy. The mark-up price on sale to customers outside the group is 20%. Wirajaya is a licensed manufacturer for sales tax whereas Anova is not.

Required:

a) Compute the sales tax payable by Wirajaya Sdn Bhd on the goods sold to Anova Sdn Bhd. State when the sales tax is due for payment.            (5 marks)

b) Assuming that sales tax payable on good sold to Anova Sdn Bhd was paid to Customs Department on 3 December 2011, compute the amount of penalty that would be imposed due to late Submission of tax.