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ACCA F9 Discounted Cash Flow Further Aspects, Lease versus Buy
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Hi john for the tax when buying on the last day is tm 脳1 if bought on the first day is tms脳2 is this a f9 rule always or because they are buying a new machine if a question have purchasing on the last day of current year it should be tm1 and if it first day it should be tms2
It is a standard tax rule for Paper PM (it is no longer called F9)
Hi John,
I dont understand the calculation of Capital Allowance in case of ‘BUY” decision. Why we took it to 5 years?
I tried to understand your point in the lecture example, but still a little lost.
It would be great if you can clarify again.
Regards
Ayesha
Because the asset was bought on the last day of the accounting year. so there are allowances for the year of purchase and for each of the four years that it was used – so five years in total.
Hi John,
Can you explain to me why taxation figures would be positive when calculating lease or buy questions. I did a question in BPP revision kit and tax was positive figures in the answer
am talking about tax payable
Because the expenditure reduced the taxable profit which means less tax payable that there otherwise would have been i.e. a saving.
I guess you have not been watching the lectures in order, because this is explained in the lectures on investment appraisal with tax.
Thanks Sir. I sat f9 in June and score 49%. I will go back through the mentioned lecture in detail to confirm my understanding.
You are welcome, and I am sure you will pass this time 馃檪
Sir i have 2 doubts.
1) Firstly imagine a scenario where they say that machine could be purchased for $100,000. But they do not mention the time period of cash flow, that is whether it should be paid at the start of the year or at the end of the year. Then do we have to assume that it is paid at the beginning?
2) Secondly if they say that it has been purchased for cash, then it means that it has been paid in the beginning of the year 0 right and so the relevant tax allowance will start from year 2 right?
1. We always assume that the investment is at the start of the first year unless told otherwise.
2. There is no such things as year 0. Time 0 is the start of the first year. If there is a one year delay in the payment of tax then the first tax saving on capital allowances will be at time 2. Have you watched the earlier lectures on investment appraisal with tax, because this is all explained in that lecture.
Thank you so much Sir. Very clear.
Thank you for your comment.