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 = 60000
The 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?
Ask the Tutor ACCA FM
Straigh line method depreciation : Hawker co SD21 vs Telford co Mock March 2024
2y ago#1Both 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.
Thank you Sir.
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