Books / ISCA TX / 03
Explore original pages from Volume 2, Practice & Answer Writing, then test your reasoning with a Case B exercise.
What happens when you close the worked answer and try it yourself?
Volume 2 · Build your own answer
Attempt the problem, compare your reasoning with the worked answer, then try again when the facts change.
The selection includes ten multiple choice questions with explanations, the complete Case B and its diagnostic review.
This PDF reproduces selected pages from the book. Original page numbers are retained, so they are not consecutive. Open the sample in a new tab or download it to read offline.
Try Case B · Corporate income tax
A student reaches the same tax payable as the worked answer. Before accepting the result, look at how the income was classified.
Adapted from Volume 2, original pages 253 and 254. This is a YA 2023 practice case for the year ended 31 December 2022. All amounts are in Singapore dollars, and the case’s stated assumptions apply.
Orion Trading has trade income of S$280,000 after capital allowances. Its accounts also contain S$20,000 of taxable bank interest that is not trading income and an exempt Singapore dividend of S$20,000 under the one tier system.
The student correctly removes both receipts from the trade reconciliation. When bringing the income sources together, the student makes the following entries:
| Item | Student’s treatment | S$ |
|---|---|---|
| Trade income after allowances | Included | 280,000 |
| Taxable bank interest | Left out | 0 |
| Exempt dividend | Included | 20,000 |
| Total statutory income | 300,000 |
All subsequent steps are correct. After the S$25,000 qualifying donation deduction and S$102,500 partial exemption, the student applies 17% and reports tax payable of S$29,325. The case assumes no corporate income tax rebate for YA 2023.
Would you accept this answer?
Identify both errors and write the corrected aggregation before opening the explanation.
The final amount matches, but both classifications are wrong. Leaving out taxable interest understates income by S$20,000. Including the exempt dividend overstates income by the same amount. The two errors cancel.
| Item | S$ |
|---|---|
| Trade income after allowances | 280,000 |
| Add taxable bank interest | 20,000 |
| Exempt dividend included | 0 |
| Total statutory income | 300,000 |
Removing interest from the trade reconciliation separates the sources of income. It does not make the interest exempt. The exempt dividend stays outside the taxable total.
(S$300,000 − S$25,000 − S$102,500) × 17% = S$29,325
Checking only the final tax would miss the problem. Check the treatment of each receipt and the intermediate totals as well.
Now suppose the bank interest is S$25,000, and accounting profit rises by the same S$5,000. The exempt dividend remains S$20,000. Every other fact and assumption is unchanged.
What happens to total statutory income and tax payable? Would the student’s original method still reach the correct amount?
The increase in accounting profit is offset by removing the larger interest receipt from the trade reconciliation. Adjusted trade profit remains S$340,000, and trade income after capital allowances remains S$280,000.
S$280,000 + S$25,000 = S$305,000
After the same donation deduction and partial exemption, the correct tax payable is:
(S$305,000 − S$25,000 − S$102,500) × 17% = S$30,175
The student’s incorrect method would still include the S$20,000 dividend instead of the interest and produce S$29,325. It now understates tax by S$850.
A sound method continues to work when the facts change. An answer that depends on two errors cancelling does not.
The full sample takes you through the original facts, a blank computation, the reasoning, the completed answer and a variation. The final three pages help you locate the first wrong decision and rebuild the answer without a template.
If income classification was the difficult part, return to the computation framework on original page 50 of Volume 1. Then close the answer and attempt Case B again.
Source: Volume 2, original pages 253 and 254, with the case facts and assumptions on pages 132 and 133. The web exercise is adapted for this page; the linked PDFs retain the original book content.