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TQ U10 DA Plant4 PDF

ABC Limited purchased $8,000 of office furniture and sold old furniture for $700. It must calculate depreciation allowances on these assets for the 2009/10 tax year. Mr. Cheung purchased a new delivery van for $40,000 which requires calculating depreciation for both the new and replaced old van. Wong Company manufactures textiles and must calculate its depreciation allowance for various plant and machinery purchases and sales between April 2009-March 2010.

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TQ U10 DA Plant4 PDF

ABC Limited purchased $8,000 of office furniture and sold old furniture for $700. It must calculate depreciation allowances on these assets for the 2009/10 tax year. Mr. Cheung purchased a new delivery van for $40,000 which requires calculating depreciation for both the new and replaced old van. Wong Company manufactures textiles and must calculate its depreciation allowance for various plant and machinery purchases and sales between April 2009-March 2010.

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RafaelKwong
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BUSI 0018 Hong Kong Taxation

Tutorial Questions
Unit 10 Depreciation Allowance: Plant and Machinery

Question 23
(a)

ABC Limited is a trading company. During the year to 31 December 2009, three
items of office furniture (20%) were purchased for $8,000 and two old items (the
cost of which was $3,000 and the tax reducing value was $900) were sold for $700.
The tax reducing value of the assets as at 1 January 2009 was:
20% pool
$65,000
30% pool
$30,000
Required:
Compute the depreciation allowance for the year of assessment 2009/10 for ABC
Limited.

(b)

Mr. Cheung purchased a new delivery van under hire purchase on 1 January 2010 to
replace the old one for his business during the year ending 31 March 2010.
Cost of the new van (cash price)
Less: Old van trade-in value
Less: Down payment
Add: Interest

$40,000
(5,000)
35,000
(10,000)
25,000
(5,000)
30,000

The sum of $30,000 is payable by 30 equal monthly installments of $1,000 each


commencing 1 January 2010. The cost of the old van was $20,000 and its tax
written down value as at 1 April 2009 was $4,000. It was the only asset in the 30%
pool of Mr. Cheungs business.
Required:
Compute the depreciation allowance (or balancing allowance/charge as appropriate)
for the old van and the new van respectively for the year of assessment 2009/10.

Check figures of depreciation allowances:


(a)
$27,300
(b)
new van: $19,350
old van (balancing charge): $1,000

TQ_U10_DA_Plant

Question 24
Wong Company (a sole proprietorship) is an established textile manufacturing business in
Hong Kong. It makes up its accounts annually to 31 March.
The tax written down values of the assets as at 31 March 2009 were as follows:
20% Pool
$300,000
30% Pool
$200,000
The following particulars were extracted from its plant register for the year ended 31
March 2010:
Date

Particulars

1.4.2009

Bought additional office furniture and fixtures for $100,000.

1.6.2009

Bought 10 spinning machines for $30,000 each.

10.7.2009

Installed a computerised weaving machine for $100,000.

1.8.2009

Purchased 4 air-conditioning units for $20,000 for the office.

15.8.2009

Transferred to business use by sole proprietor a motor vehicle (open market


value as at 15.8.2009: $25,000). The vehicle had been bought for private
use on 1.8.2008 for $30,000.

1.11.2009

Sold 2 air-conditioning units for $8,000.

15.1.2010

Sold the computerised weaving machine bought on 10.7.2009 for $110,000.

28.2.2010

Purchased a motor vehicle on hire purchase with monthly installment of


$10,000 for three years, the first installment was due and paid on
31.3.2010. The cash price for the vehicle is $300,000 and the deposit paid
for it on 28.2.2010 is $40,000. The vehicle was imported from Japan and
Wong Company received it on 2.4.2010.

Required:
Calculate the depreciation allowances for Wong Company for the year of assessment
2009/10.

Check figures:
DA: pooling system - $206,300
DA: HP asset - $28,333
Total DA: $234,633

TQ_U10_DA_Plant

Question 25
Mr. Wong is the owner of a cold storage business of which the accounts are made up to 31
March. The written down values of various ranking assets as at 31 March 2007
were as follows:
Rate of
Written Down
Depreciation
Value
%
$
Air-conditioning plant
10
1,550,000
Furniture
20
205,000
Delivery trucks
30
950,000
Motor cars
30
630,000
Machinery (under hire purchase, note 7 below) 30
900,000

The following information for the two years ended 31 March 2009 is available:
(1)

New furniture at a cost of $150,000 was acquired on 1 July 2007; the scrap value
received for old items disposed of at the same time was $9,000.

(2)

One of the trucks was sold on 30 September 2007 for $45,000 and a new one was
purchased on the same date at a cost of $100,000.

(3)

On 1 January 2008, Mr. Wong took one of the cars which had previously been
used exclusively for business purposes for his own private use and replaced it with
his own private car which was thereafter used wholly for business purposes. The
open market value of the business car at 1 January 2008 was $64,000 (original cost
$100,000). Mr. Wong's private car was acquired at a cost of $120,000 on 15
October 2005.

(4)

On 1 November 2007, Mr. Wong purchased for business use a computer on hirepurchase terms. The cash price was $68,000. He paid $20,000 deposit and the
balance was to be paid by 12 monthly installments of $5,000 each made up of
$4,000 capital and $1,000 hire-purchase interest. The first instalment was due on 1
December 2007.

(5)

On 14 April 2008, a fire broke out in the business premises. On 1 June 2008, the
company received $500,000 insurance compensation of which a quarter was for
damage to the furniture whereas the balance was for damage to the old airconditioning plant.

(6)

Mr. Wong's son completed his studies abroad and returned to Hong Kong on 3
January 2009. Mr. Wong allowed him to use one of the business cars whenever he
liked. The Assessor agreed that the market value of the car as at 3 January 2009
was $80,000 (original cost $100,000) and that on average one third of the use in
the year was for private purposes by Mr. Wong's son.

TQ_U10_DA_Plant

(7)

Monthly installment for the machinery bought under hire purchase was $50,000
(including interest portion of $10,000). The last installment was paid on 31 March
2008. The title of the machinery was then transferred to the business on the same
day.

Required:
Compute the depreciation allowances to which Mr. Wongs business was entitled for the
years of assessment 2007/08 and 2008/09 respectively.

Check figures for 2007/08:


DA: pooling system: $827,140
DA: HP items: $35,520; $471,600
Total DA: $1,334,260
Check figures for 2008/09:
DA: pooling system: $552,138
DA: HP items: $23,184; $16,000
Total DA: $591,322

TQ_U10_DA_Plant

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