Question

Zeta Ltd was set up in 2008 in Beijing. The company's statement of profit or loss for the year end 31 December 2019 is as follows:

RMB RMB

Sales 212,654,300

Cost of sales (203,378,200)

9,276,100

Income from Investment 630,000

Other income. 50,000

Total Income 9,956,100

Financial expense (3,768,230)

Administrative expense (3,006,000)

Marketing expense (1,963,500)

Other cost and expense (207,800) (8,945,530)

Net profit for 2019 1,010,570   

  

The following information is relevant to the items that was recorded in the above statement of profit or loss:

(1) Depreciation of the factory equipment of RMB 20,000 was included in factory overheads. The cost of the equipment was RMB 600,000 and the depreciation period of 10 years with no residual value was used to calculate the accounting depreciation.

(2) In January 2019, Zeta Ltd purchase a new equipment for RMB 60,000. This new equipment is qualifies for the energy saving incentive

(3) In January 2019, Zeta Ltd purchase 80 desks for the head-office at RMB300 each. For accounting purpose the chair has 3-years useful life and no residual value. Zeta Ltd used the accelerated depreciation method for the accounting purpose. However, Zeta Ltd a was not qualifies for the accelerated depreciation incentive for tax purpose for these desk.

(4) Inventory costing RMB 32,500 was thrown away in 2019, due to the warehouse being destroyed in a fire during the year. The cost of this inventory was included in the cost of sales.

(5) A fine of RMB8,000 issued by the tax authorities for late tax payment for last year. And this fine was included in the other cost and expense.

(6) X-Rool Ltd is one of client of Zeta Ltd, and X-rool Ltd was bankrupt in 2019. So Zeta Ltd write-off receivable of RMB7,000 from X-rool Ltd.

(7) In 2019, Zeta Ltd had Qualified research and development (R&D) expenses of RMB72,000.

(8) Total salaries incurred in 2019 were RMB2,220,000.The salaries accrued for December 2019 and paid in January 2020 were RMB789,000. And employees' 2019 bonus for RMB 260,000 was paid in February 2020.

(9) Zeta Ltd also paid Staff union expenses of RMB590,000 during the 2019.

(10) Besides of the salary payment to the employee, Zeta Ltd also provided stock option incentive to its' employees. In July, 2019 , the grant date, the provision for employees’ stock option of Zeta Ltd was RMB280,000. None of these stock options will be exercised in 2019.

(11) Water charges of RMB 99,230 for December 2019 were accrued in 2019. These charges were paid in January 2020.

(12) Income from investment included:

• Interest income RMB150,000 from government bonds. Zeta Ltd purchase this bone in January 11,2017.

• Interest income RMB200,000 from major State-supported public infrastructure facility project. Zeta Ltd purchase this bone in January 16,2015.

• Bank interest income of RMB12,300

(13) A donation paid to help poor-family's child study through the China Red Cross for RMB50,000.

(14) Lisa is one of shareholder of Zeta Ltd, and was diagnosed with cancer in March 2019. Zeta Ltd donated RMB30,000 to Lisa.

(15) Zeta Ltd received an environment protection purpose government subsidy received of RMB30,000, which is include in other income.

The following item was NOT recorded in the accounts:

(16) December 2019,the board of directors decided to distribute a dividend of RMB180,000 to the shareholders of Zeta Ltd. However, this decision was NOT recorded in the accounts

Required:

Calculate the enterprise income tax (EIT) payable by Zeta Ltd for the year 2019, assuming that Zeta Ltd has made all relevant applications and reports to the tax authorities.

Notes:

1. You should start your computation with the profit before tax figure of RMB 1,010,570 and list all of the items (1) to (16) as referred to in the question, identifying any item which does not require adjustment for tax purposes by the use of zero (0).

2. You are not required to make adjustments for any of the above items for accounting purposes.

Answer 1

GIVEN	(Amount in RMB)
Sales	212654300
COGS	-203378200
	9276100
ROI	630000
Other Income	50000
	9956100
Financial Expense		-3768230
Admin Exps		-3006000
Marketing Expense		-1963500
Other		-207800
		-8945530
Net Profit		1010570
Depreciation		20000
Addition to F A		60000
Purchase (desks)		24000
Inventory		32500
Tax Penalties and Interest		8000
Written off Losses		7000
Salaries		222000
Staff Union Expenses		590000
ESOP		280000
Water Charges		99230
Donation		50000
Income from Investments
Govt Bonds	150000
SSPIF Project	200000
Bank Interest	12300
Govt Subsidy recd	280000
Shareholders Medical Aid		30000

	(Amt in RMB)
Total Income	9956100
Non Taxable Income	200000
Exempted Income	442300
Expenses	582000
Depreciation & Losses	35000
TAXABLE INCOME	8696800