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Can you please explain the tax allowable depreciation for 4th year?
tax allowable on the plant and machinery at 50% in the first year, followed by 25%
per year thereafter on a reducing balance basis. A balancing adjustment is available in the year the plant and machinery is sold. Burung Co pays 20% tax on its annual taxable profits. No tax allowable depreciation is available on the remaining investment assets and they will have a nil value at the end of the project.Answer per text
Capital allowance 1ST year 8 2nd year 2 3rd year 1.5 4th year 0.5as per my calculation
Balance of asset 1st year (16 — FYA 8)= 8 so TAD is 8, 2nd year 8 so TAD is 2 , 3rd year 6 so TAD is 1.5
4th year -= (8+2+1.5-8= 3.5), so TAD is 3.5 * 25% = .875
so how did they get 0.5 as TAD in 4th year??
I think you must be using an old edition of the Revision Kit, because Buring is not in the current edition.
However I do have the original exam question and answer.
The TAD in each of the first three years is 8, 2, and 1.5 (which you are obviously happy with.
Therefore the tax written down value after 3 years is 16 (the original cost) less the TAD in the first 3 years, which is 16 – (8 + 2 + 1.5) = 4.5.
In the final year, there is a balancing allowance of the difference between the TAD and the scrap proceeds (as usual) and therefore the TAD is 4.5 – 4 = 0.5.
Hi John..
No this is 2019 kaplan kit . but yes there is scrap of 4m. thank you so much
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