acct3161ABCmte2010_11 - ACCT3161 Taxation Examination...

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ACCT3161 Taxation Examination (2010/2011) SCHOOL OF ACCOUNTANCY THE CHINESE UNIVERSITY OF HONG KONG ACCT3161 Taxation EXAMINATION TIME: 2 HOURS Attempt all questions. Problem 1 (35%) Mr. wan is employed as the tax director by BCD Ltd, a Hong Kong incorporated company. During the year ended 31 March 2009, BCD Ltd suffered substantial losses from the economic downturn and therefore underwent a salary package restructuring with effect from 1 April 2009. In order to encourage the staff to accept the new package, each staff member who chose to continue under the new structure was paid a commitment incentive of $30,000. Mr. Wan accepted the new salary package structure, and received the commitment incentive on 1 May 2009. Details of Mr. Wan’s new salary package, income and expenditure for the year to 31March 2010 are as follows: (1) Salary: $80,000 per month. (2) Productivity incentive: $50,000 based on senior management’s recommendation. A positive recommendation was submitted but has not yet been approved. (3) Medical benefit: BUPA Medicare, maximum coverage $1,000,000 per annum, $100 per month was charged by BCD Ltd for this benefit. BCD Ltd paid $1,500 per year per staff. During the year, Mr. Wan claimed a total reimbursement of medical expenses of $8,000 from BUPA. (4) Company car: Mr. Wan used a car owned by BCD Ltd costing $200,000; the carrying value per BCD Ltd accounts was $140,000 at 1 April 2009, the second hand value of the car at 1 April 2009 was $120,000. The petrol cost of $3,000 per month was reimbursed by BCD Ltd, one-third was for Mr. Wan’s private use. (5) Housing benefit: Mr. Wan and his family had been living in a leased flat of one bedroom at $18,000 per month. BCD Ltd reimbursed him half of the rental. On 1 January 2010, he terminated the lease and moved into his parents’ flat for which he paid no rent. BCD Ltd agreed to continue to pay him the same amount as before. (6) Share option: BCD Ltd operates an employee share option scheme and granted Mr. Wan options to subscribe for 10,000 shares at $5 per share. Mr. Wan paid $1,000 for the options on 9 September 2009. He exercised the right to acquire 5,000 shares on 10 October 2009, and sold the remainder of the options to a colleague for $8,000 on 11 November 2009. The 5,000 shares were sold on 12 December 2009. Details of the market price per share were: 9 September 2009 - $8 10 October 2009 - $9.5 11 November 2009 - $7 12 December 2009 - $4.5 (7) Directorship: Mr. Wan was appointed as the managing director of SIG Ltd, a subsidiary of BCD Ltd.
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acct3161ABCmte2010_11 - ACCT3161 Taxation Examination...

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