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Hi John
The question said that the realizable values were inclusive of tax impact, but the Rv for land and building wasn’t calculated based on an after tax basis.
When it is not stated that residual values are after tax, do we assume that?It is says it is inclusive of the tax impact then it means the tax impact has been taken into account in the values. So it is saying the the residual values are after tax.
(Had they written that it excluded the tax impact, then the residual values would be before tax and you would then need to account for the tax.)
But then if tax impact have been taken into consideration, why still do a balancing allowance computation for machinery?
The ‘inclusive of tax impact’ in the question is referring to the land and buildings.
The balancing allowance is for the machines and the question specifically says that a balancing adjustment will be required in respect of the machinery !!
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