Tri 1 2021/2022

BAC2674: Taxation 1
Tutorial 5/6: Business Income (P3): Capital Allowance

QUESTION 1

Mayfair Sdn. Bhd. which prepares account to 31.12 annually has the details of the following
expenditures:
RM’000
1. Plant and machinery (heavy) 200
2. Truck 300
3. Air- conditioners 50

These assets were acquired during the year 2016.

Compute the capital allowance (Initial allowance & Annual Allowance) of the fixed assets for
relevant years of assessment (2016, 2017, 2017, 2018 & 2019)

Yr 1 - Yr 2 -
PLANT (200,000) 2015 2016 Yr 3 Yr 4 QPE 200000
IA (20%) 40000      
AA (20%) 40000 40000 40000 40000
Residual Expenditure
(RE) 120000 80000 40000 0

TRUCK (300,000) QPE 300000

IA 60000      
AA 60000 60000 60000 60000
RE 180000 120000 60000 0

QPE 50000
AIR COND ((50,000) Yr 5 Yr 6 Yr 7 Yr 8
IA 20% 10000              
AA 10% 5000 5000 5000 5000 5000 5000 5000 5000
RE 35000 30000 25000 20000 15000 10000 5000 0

YA 2015
Adjusted Income XX
- Capital allowance (215,000)
Statutory Income XX

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QUESTION 2

GoodTimes Bhd. acquired a machine (general) on hire purchase (HP) terms as follows:

RM
Cost of machine 240,000
Deposit paid 1.2.2019 25% of cost
HP amount (inclusive of HP interest) 195,000
Term of repayment 20 months

1st installment of RM9,750 commenced on 1.3.2019. The company closes its accounts to 31.12
every year.

Required:

Calculate the Capital Allowance for year of assessment (YA) 2019 & YA 2020.

Cost of machine 240,000

Less: 25% deposit paid (60,000)
Capital portion financed under HP 180,000

Monthly capital installment = RM 180,000 / 20 months = RM 9,000 per month

QPE
Deposit 60,000
Installment paid during the year 90,000_
(1.3.19 – 31.12.19) 10 months x RM9,000 150,000

Ist YEAR:
IA 20% of 150,000 30,000
AA 14% 21,000 (51,000)
Residual expenditure 99,000

2nd YEAR:
Installment paid during the year 9,000 x 10 months 90,000
QPE (150,000 + 90,000) 240,000

IA 20% x 90,000 18,000

AA 14% x 240,000 33,600 (51,600 )
Residual expenditure (99,000 + 90,000 – 51,600) 137,400

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QUESTION 3 KIV

PutraPadu Sdn. Bhd. purchased a Toyota car for RM200,000 on 1.1.2018 and closes its accounts
on 31.12 annually. The car was sold on 30.9. 2020 for RM 130,000.
Calculate:
(i) The capital allowance for PutraPadu Sdn. Bhd. for the relevant year of assessment.
(ii) The residual expenditure for each year of assessment.
(iii) The balancing charge or balancing allowance upon disposal of the car.

QUESTION 4

Mr. Lee is the owner of Lee Automotive Center, a car service and repair in Shah Alam, Selangor.
The business commences operation in June 2018 and has been closing its accounts on 31 December
annually. In the year 2020, the business acquired the following assets:

i) Air compressor
This general duty reliable air compressor was acquired on 15 February 2020 for RM7,000, The
machine is used to operate many tools within the workshop, including pneumatic hand tools and
some auto lifts. Add:

ii) New truck for business use. The vehicle was acquired on 10 March 2020, under a hire purchase
scheme as follows:
RM
Cost 50,000
Deposit paid on 10 March 2020 20%
Loan (including interest) 53,000

Instalment period 50 months

First instalment due on 1 April 2020

On 24 March 2020, the business disposed of an old truck for RM17,400. The residual expenditure
brought forward at 1 January 2020 was RM11,900.

Required:

Compute the capital allowances claimable by Lee Automotive Center for the above assets for the
year of assessment 2020. Calculate balancing charge or balancing allowance (if any) for any
qualified asset.
Note: Indicate ‘NIL’ in appropriate column for any assets which does not qualify for capital
allowance.

Suggested answer:
Newly acquired assets
Air compressor
YA2020
Qualifying plant expenditure 7,000
New
Less: trucks
Capital(Commercial vehicle)
allowance (accelerated)
Initial allowance (20% x RM7,000) 1,400
Annual allowance (14% x RM7,000) 980 2,380 3
Residual expenditure 4,620
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YA2020
Qualifying expenditure
 Deposit (20% x RM50,000) 10,000
 Instalments {[(RM50,000 – RM10,000/50 mths.] x 9
7,200 17,200
mths.}

QPE 17,200
Less: Capital allowance
Initial allowance (20% x RM 17,200) 3,440
Annual allowance (20% x RM 17,200) 3,440 6,880
Residual expenditure 10,320

Old Vehicle
YA2020
Sales proceeds 17,400
Residual expenditure 11,900
Balancing charge 5,500

QUESTION 5

Tahan Enterprise owned by Encik Omar started a business on 1 January 2018 and closes its annual
accounts on 31 December. The following are information relating to the fixed assets used in the
business:

New Machine
On 1 July 2018, he purchased new machine at a cost of RM120,000. In order to operate the
machine, two cost were incurred: the cost of alteration (tunneling & levelling) to the land of
RM13,000 and incidental costs of installation of RM6,500.

Motor vehicle
On 1 March 2018, a car and a lorry were purchased for RM 160,000 and RM 190,000
respectively. On 31 January 2020, the lorry was sold for RM72,000.

Required:

(i) Calculate the capital allowances, balancing charge/balancing allowance for each asset for
all relevant years up to the year of assessment 2020.

(ii) What is the qualifying capital expenditure for the purchase of a new car in 2020 for RM
110,000?

Newly acquired assets

New Machine
YA2018
% of site preparation cost = RM13,000/(RM120,000+RM13,000+6,500) = 9.3% < 10%
Thus, the site preparation cost qualifies as qualifying plant expenditure.
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Qualifying expenditure (RM120,000 + RM13,000+6500) 139,500

Less: Capital allowance (accelerated)
Initial allowance (20% x RM139,500) 27,900
Annual allowance (14% x RM139,500) 19,530 ( 47,430)
Residual expenditure 92,070

YA 2019
AA (14% of 139,500) 19,530
RE 72,540

Car (Non Commercial vehicle)

YA2018
Cost 160,000
50,000
Qualifying expenditure
(restricted)
QPE 50,000
Less: Capital allowance:
Initial allowance (20% x RM50,000) 10,000
Annual allowance (20% x RM50,000) 10,000 - 20,000
Residual expenditure 30,000

YA2019
AA 20% 10,000 10,000
RE 20,000

YA2020
AA 20%. 10,000
RE 10,000

Lorry - No restriction ( Commercial vehicle)

YA2018
Cost 190,000
YA2018
190,000
QPE
Less: Capital allowance:
Initial allowance (20% x RM190,000) 38,000
Annual allowance (20% x RM90,000) 38,000 76,000
Residual expenditure 114,000

YA2019
AA 20% 38,000 38,000
RE 76,000

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YA2020
AA 20%. 38,000
RE 32,000