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50% -P4, last exam, I am thankful to Almighty Allah that I have completed my ACCA qualification. Congratulations to everyone who passed. That exam was not easy –
Sir,
with reference to the above. I am afraid the thing is still not clear.
as per my understanding.
assume we have a project of 5 years, and the company could claim / eligible for 50% First year allowance on qualifying expenditure followed by writing down allowance of 40% applied on reducing balance basis. Tax payment, tax credit and charges will be paid or received 12 months after they arise. i.e. on year tax delay. Tax 30%
Initial investment is 800k with a residual value after 5 years is 40k.
Year 0 800k
allowance X0 (400) × 30% 120 tax timing Year 1
————-
400
allowance X1 (160)× 30% 48 tax timing Year 2
—————
240
allowance X2 (96) × 30% 28.8 tax timing Year 3
—————
144
allowance X3 (57.6)× 30% 17.3 tax timing Year 4
————-
86.4
allowance X4 (34.6) tax timing Year 5
————–
51.8proceeds at year5 (40)
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at yr 5 B/A 11.8 tax timing Year 6the above is the tax on arrears, thats why B/A time is at year 6.
Sir, if tax not in arrears, then if statement explicitly written as:
” the company could claim / eligible for 50% First year allowance on qualifying expenditure followed by writing down allowance of 40% applied on reducing balance basis”.Does this mean FYA allowance is in year 0 and tax timing year is also 0.
then after the reduced amount we claim the WDA of 40% in year 1 and tax timing year is also 1.
Further, if statement written as:
“Tax allowable depreciation is available on the plant and machinery at 50% in the first year, followed by 40% per year thereafter on a reducing balance basis. A balancing adjustment is available in the year the plant and machinery is sold.” NO tax delay.
Sir, this means that it is just a simple that in first year we take 50% and tax timing is Yr 1also
then after the reduced amount we claim the WDA of 40% in year 2 and tax timing year is also 2.Kindly clarify my understanding. I will be grateful of yours.
Sir.
In the above question we have to actually hedge the net payment of $ 2.4mln.
so while working out option outcome i also take 24 contracts but i think while convert the over hedge dollar into £ amount the buying rate should be taken as we have to buy that amount of over hedge at the spot so the correct rate is 1.5996.
Kindly clarify.
Sir John
In the same question using PPT the value of S1 from the formula is 1.53 but in
printed answer in Kit taken 0.654 . Similar with S2 value 1.56 but in
printed answer in Kit taken 0.6410.some sort of exchange indirect code taken.
Sir what is it & why it is taken.
I am confused.
Sir John,
Thanks for clarifying my confusion.
I will take care for this while practising the questions.
You said above that “using debt of 100 and equity of 300 would be in the correct ratio.”
means that while calculating WACC i use in the proportion column as :
Equity 300/400 and for debt 100/400 . Am I right.Thanks again in Advance.
By the grace of Allah I have Passed P2 with 50% in first attempt.
Thanks Open Tuition…