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Hello Sir.
I am puzzled over the calculation method for tax allowable depreciation on a straight line basis.
In the exam video, tax claimable was calculated as:
Yr1-Yr4 : (Invest – Scrap) / Proj life * tax % = 338k.Why isn’t the tax claimable calculation as below:
Yr1-Yr3 : (Invest / Proj life * tax %) = 375k.
Yr4 : ((Invest / Proj life) – Scrap) * tax % = 225k.Thank you.
It is because the question specifically said for it to be on a straight line basis (and the examiners own answer had the saving as being 338K per year).
However more strictly it should be as you have typed out, and the examiner seems to have learned from his mistake. If a question does say the TAD is on a straight line basis then he does write that full marks are given for doing it either way.
Most times in the exam it is the normal reducing balance method in which case the scrap value is never taken into account until the final year.
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