F1

For the year ended 30 September 20X2, KJ’s statement of profit or loss included a profit before tax of $247,000. KJ’s expenses included political donations of $19,000 and entertaining expenses of $11,000.

KJ’s statement of financial position at 30 September 20X2 included plant and machinery with a carrying value of $168,500. This is comprised of plant purchased on 1 October 20X0 at a cost of $280,000 and machinery purchased on 1 October 20X1 at a cost of $150,000.

KJ depreciates all plant and machinery on the straight line basis at 10% per year.

All expenses other than depreciation, amortisation, entertaining, taxes paid to other public bodies and donations to political parties are tax deductible.

Tax depreciation is deductible as follows:

50% of additions to property, plant and equipment in the accounting period in which they are recorded
25% per year of the written-down value (i.e. cost minus previous allowances) in subsequent accounting periods except that in which the asset is disposed of.
The corporate tax on profits is at a rate of 25%.

Calculate the tax payable by KJ for the year to 30 September 20X2.

(Your answer should be rounded down to the nearest $.)

$
Accounting profit 247,000
Adjustments:
Add back: disallowed expenses (19,000 + 11,000) 30,000
Add back: accounting depreciation (280,000 + 150,000) × 10% 43,000
Less: tax depreciation (W1) (110,000)
_______
Taxable profits 210,000
_______
Tax at 25% 52,500

Tax depreciation: $
First year allowance 150,000 × 50% = 75,000
Annual allowance (280,000 – 140,000 FYA 50% for 30/9/X1) × 25% = 35,000
_______
Total tax depreciation 110,000

Can someone please explain how the Tax depreciation part is worked out?