- 20 Marks
Question
Menyami Limited has been in operations as a Timber Merchant for several years and prepares accounts to 31st December each year. The company’s Non-Current Assets as at 31st December, 2016 were as follows:
| Description | GH¢ |
|---|---|
| Timber Concession (30 years Lease) | 1,500,000 |
| Building | 400,000 |
| Plant and Machinery | 2,800,000 |
| Timber Trucks | 1,200,000 |
| Land Cruiser Vehicle (1/3/2017) | 280,000 |
| Pick Up Vehicle (1) (1/5/2018) | 180,000 |
| Computers and Accessories | 30,000 |
| Furniture and fittings | 12,000 |
Menyami Limited applied to the Commissioner-General and was granted depreciation allowances for the use of the above Non-Current Assets over the years.
In July, 2017, the company acquired a Plywood processing plant on hire purchase at the cost of GH¢1,800,000. The Company paid a deposit of GH¢800,000 and the balance is to be paid over a period of four years in advance starting from 1st January, 2018. The first instalment was paid on due date.
During the year 2018, a plant which was acquired in January, 2016 was rehabilitated at the cost of GH¢20,000.00.
The depreciation allowance rates applicable to each pool of depreciable assets are as follows:
| Class | Rate |
|---|---|
| Class 1 | 40% |
| Class 2 | 30% |
| Class 3 | 20% |
| Class 4 | 10% |
All the assets unless otherwise indicated were all bought in January 2016.
Required:
Compute the depreciation allowances for the years 2016, 2017 and 2018 in a columnar format.
Answer
Computation of Capital Allowances for Menyami Limited for 2016, 2017, and 2018
2016
| Description | Class 1 (40%) | Class 2 (30%) | Class 3 (20%) | Class 4 (10%) | Total |
|---|---|---|---|---|---|
| Cost | 30,000 | 3,200,000 | 12,000 | 400,000 | |
| Depreciation Allce. | 12,000 | 960,000 | 2,400 | 40,000 | 978,400 |
| WDV | 18,000 | 2,240,000 | 9,600 | 360,000 |
2017
| Description | Class 1 (40%) | Class 2 (30%) | Class 3 (20%) | Class 4 (10%) | Total |
|---|---|---|---|---|---|
| WDV | 18,000 | 2,240,000 | 9,600 | 400,000 | |
| Additions | 875,000 | 0 | 0 | ||
| 18,000 | 3,115,000 | 9,600 | 400,000 | ||
| Depreciation Allce. | 5,400 | 810,750 | 1,920 | 40,000 | |
| WDV | 12,600 | 2,304,250 | 7,680 | 320,000 |
2018
| Description | Class 1 (40%) | Class 2 (30%) | Class 3 (20%) | Class 4 (10%) | Total |
|---|---|---|---|---|---|
| WDV | 12,600 | 2,304,250 | 7,680 | 320,000 | |
| Additions | 325,000 | ||||
| Repair Cost | 12,000 | ||||
| 12,600 | 2,641,250 | 7,680 | 320,000 | ||
| Depreciation Allce. | 5,040 | 792,375 | 1,536 | 40,000 | |
| WDV | 7,560 | 1,848,875 | 6,144 | 320,000 |
- Tags: Capital allowances, Depreciation Allowances, Non-current Assets
- Level: Level 2
- Topic: Income Tax Computation
- Series: FEB 2020
- Uploader: Samuel Duah