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?