Question

Corporate Income Tax Computation.
Instruction : Referring to the following information,
1. Compute the corporate income tax payable of Company B.
2. Write down accounting entry for those 4 transactions. (if any)
3. Write down accounting entry to record the corporate tax liability/refundable.
Company B is SME and VAT registrant.

 The audited financial statements of Company B present the profit for the accounting period 1 January 2019 – 31 December 2019 with 500,000 Baht.
Here are the additional information from the auditing of the accounting book and supporting documents.
 Ms. Ammie is company’s staff and was dead in June 2018. She is very diligent during her services so the company decided to give her child for the subsidy of cost of life. The accountant has booked as the company expenses with amount of Baht 40,000.
 The company sold their product to the Revenue Department for 5,000,000 Baht. In this year, the company received the payment, the company has been withheld the tax at source at the rate 1 percent equal to 50,000 Baht. The accountant has book as the expenses in the profit and loss statement.
 The company has bought land and constructed the building with the grand total cost of Baht 8,000,000. The accountant has booked the depreciation expenses in the profit and loss statement with the straight line method at the rate 5 percent per year equal to 400,000 Baht. In fact, the cost of building is 4,000,000 Baht and there is the interest expenses paid during construction 1,000,000 Baht. The building is ready to use in this accounting period 146 days.
 The company has sold the old machine and receive the money 30,000 Baht. This transaction, the accountant does not book as the company income for the net profit computation since he thought that it is not related to the company business.
 The detail of taxable loss carried are as follows: (Baht)(- is loss and + is profit)

Year
2012 -600,000
2013 -200,000
2014 +250,000
2015 -150,000
2016 +300,000
2017 +150,000
2018 +100,000

Answer 1

Solution:

Computation of the corporate income tax payable of Company B:

Taxable Income	Baht	7,30,000
Less: Carried forward of Losses for 5 years		-
Net Taxable Income	Baht	7,30,000
Income Tax @ 15%	Baht	1,09,500
(Income between Baht 300000 and 3 million is 15%)

S No	Description	Baht	Baht
	Net Profit		5,00,000
	Add: Transactions Disallowed
1	The Company had received Amount from Revenue Dept nett off Withhold tax of 1%. Since the accountant has not shown this with hold amount as income it has to be added back to Profit	50,000
2	Wrong Calculation of Depreciation (Note 1)	1,50,000
3	Sale proceeds of Machinery ignored	30,000	2,30,000
	Total		7,30,000
	Less: Transactions allowed
1	Since the subsidy of cost of life is the responsibility of he Company it is allowed and exempted no amount is to be added back.		-
	Total Taxable Profit revised		7,30,000

Note: Computation of Depreciation
Particulars	Baht	Remarks
Cost of Land and Building	80,00,000
Cost of Building	40,00,000	Depreciable asset
	40,00,000
Less: Cost of Interest	10,00,000	To be Capitalized
Cost of Land	30,00,000	No Depreciation

Particulars	Baht
Total Cost of Building	40,00,000
Add: Interest Expenses Capitalized	10,00,000
Value of Building	50,00,000
Depreciation of 5% on above	2,50,000
Value of Building as on 31-12-2019	47,50,000

Difference of Depreciation to be added back to Profit
Particulars	Baht
Original depreciation accounted in P&L a/c	4,00,000
Less: Depreciation computed above	2,50,000
Expenses disallowed	1,50,000

2. Accounting entries for the 3 transactions:

S.no	Particulars	Debit (Baht)	Credit (Baht)
1	Withhold Tax A/c                                     Dr.	50,000
	To Tax expenses		50,000
	(Being withhold tax wrongly posted in expenses is written back)
2	Buildings A/c                                              Dr.	1,50,000
	To Depreciation A/c		1,50,000
	(Being excess depreciation debited is added back to Buildings A/c)
3	Sale proceeds of Machinery A/c              Dr.	30,000
	To P&L A/c		30,000
	(Being sale proceeds of Machinery are transferred to P&L A/c.)

3. Accounting entry to record the corporate tax liability/refundable:

S.no	Particulars	Debit (Baht)	Credit (Baht)
1	Income Tax Expenses A/c                           Dr.	1,09,500
	To Provision for Income Tax A/c.		1,09,500
	(Being provision for Income Tax created for 2019)