Practical Question 11- Tax on Profit for Trading Company

TOP ONE TRADING COMPANY is a company incorporated in Cambodia since 2014. TOP ONE TRADING COMPANY is merchandising company, and company has two major products.

Under the tax regulations, TOP ONE TRADING COMPANY is required to calculate and pay annual Tax on Profit. The following financial statements in relation to the tax year ended 31 December 2016.

TOP ONE TRADING COMPANY
Income Statement
For 2016
		Note
Sale:
Sale from Computers	220,000
Sale from Phones	110,000
Total Sale ……………………………………..	330,000
Cost of Goods Sold:
Computers-COGS …………………………………….	100,000
Phones-COGS ………………………………….	90,000
Total COGS ……………………………………..	190,000
Gross Profit …………………………………….	140,000
Total Expense:
Advertising ……………………………………………..	4,000
Salary ……………………………………………………..	60,000
Office supply …………………………………………..	700
Electricity …………………………………………..	2,000
Water supply…………………………………………..	400
Rental ……………………………………………………	12,000
Telephone and Internet…………………………	800
Depreciation…………………………………………..	10,600	1
Entertainment ……………………………………	1,700
Other expense……………………………………	10,400	2
Total Expense…………………………………………..	102,600
Profit/(loss) before tax …………………………………	37,400

TOP ONE TRADING COMPANY
BALANCE SHEET
AS OF 31 DECEMBER 2016
						Note
Current Assets
	CASH
		Cash on Hand	10,000
		Cash at Bank	50,000
				60,000
	AR			40,000
	INVENTORY			70,000		3
	OTHER ASSET
	Advance	for project…..	7,130
	Prepayment	of Profit Tax.	3,000			4
				10,130
Total Current Assets				180,130
Fixed Assets
	Computer	Equipment..	1,200
	Office	Equipment..	1,600
	Office	Furniture…	2,400
	Vehicle	………………	12,000
	Other Fixed	Assets………	4,000
Total Net Fixed Asset		………………..	………….	21,200
Total Assets		……………….	………….	……….	201,330
Current Liability (CL)
	AP……	……………..	…………	50,000
	Other CL
	Other	Payable…..	1,000			5
	Tax	liability…..	930
				1,930
Total Current Liability		……………….	…………..	51,930
EQUITY
	Owner’s	Capital…..	100,000
	Retained	Earning…	12,000
	Current Profit	before tax…	37,400
TOTAL EQUITY……		……………	………..	149,400
TOTAL LIABILITY &		EQUITY…	……..	………..	201,330

The following notes are as follows:

Note 1

Depreciation expense is based on accounting policy.

Note 2

Company made provision for warranty expense on sold products is $500.
Repair and maintenance of company’s car is $500.
Patent expense is $300.
TOP ONE TRADING COMPANY donated $3,000 and $1,200 to theCambodian Red Cross (CRC) and homeless people respectively.

Note 3

Company has beginning inventory of $50,000.

Note 4

Prepayment of Profit Tax is excluded revenue earned on December 2016 for tax calculation base.

Note 5

Company made provision for warranty on sold products is $500.

Other information as follows:

Depreciation of Tangible Fixed Assets Class 2 – 4 (Declining Balance Method) for 2015

Tax profits are $10,000 and $7,000 for year 2014 and 2015 respectively.

Required:

Ignore other information, solve the following issues:

Declare tax on profit and complete financial figures (2016) if any accordance with tax form requirement from page 3/16 to 16/16. You may require to adjusted income statement and balance sheet.