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In Hawker co
“SL tax allowable depreciation is available on the vehicle”
The TAD is calculated using (cost-residual value)/4
Given cost= 34,000 Residual value=14000
(34000-14000)/4 =TAD of 5,000. Resulting tax benefit at tax rate 20% yr 1 to 4 = $1000
I find this approach simpler as it lead to equal TAD throughout the useful life.Whilst in Telford co (Pre March2024 mock in Test reach)
“SLM over five years”
Given cost =560,000 Residual value = 60000The TAD is 112,000 for yr 1to 4 (tax benefit 22,400)
Yr 5 BA is 52,000. (tax benefit 10400)The end result is the same I believe.
Will both approach be accepted in the exams, Sir?Both approaches are correct and would be accepted in the exams, as they are consistent with the principles of calculating TAD using the straight-line method.
The key is to apply the method consistently and correctly according to the tax rules specified in the exam question.
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