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My problem:
machinery (MP1,250 million). Tax allowable depreciation is available on the machinery at
an annual rate of 10% on cost on a straight-line basis. A balancing adjustment will be required at the end of year
five, when it is expected that the machinery will be sold for MP500 million (after inflation).
Answer Tax Dep for 5 yrs Calculated 125 and balancing adjustment same as well.
Don’t understand How?
Could you plz little explanation regarding this?@byron1976 said:
Dear Sir,
My problem:
machinery (MP1,250 million). Tax allowable depreciation is available on the machinery at
an annual rate of 10% on cost on a straight-line basis. A balancing adjustment will be required at the end of year
five, when it is expected that the machinery will be sold for MP500 million (after inflation).
Answer Tax Dep for 5 yrs Calculated 125 and balancing adjustment same as well.
Don’t understand How?
Could you plz little explanation regarding this?Please do not ask the same question twice! It will not get you an answer any faster (we answer within 24 hours, but we cannot sit permanently at the computer – especially since you are on a different time zone, and I do need to sleep!!!)
The writing down allowance each year = 10% x 1250 = 125.
At the end of 5 years, the tax written down value = 1250 – (5 x 125) = 625.
Therefore there is a balancing allowance of 625 (WDV) – 500 (sale proceeds) = 125.
I do suggest that you watch my free Paper F9 lectures on investment appraisal with tax (because dealing with capital allowances is revision of F9).
Dear Sir,
Thanks for your explanation and advice, I don’t mean to disturb your sleep. Second time I post it cause I did not address you in my first one.
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