BUSI 0018 Hong Kong Taxation

Tutorial Questions
Tutorial 10 Depreciation Allowance: Plant and Machinery

Answer 23
(a)

Computation of depreciation allowance for ABC Limited for 2009/10:

Reducing value b/f

Addition
Less: Initial allowance (60%)
Less: Disposal
Annual allowance
Reducing value c/f

(b)

20%
$65,000
8,000
(4,800)
$68,200
( 700)
$67,500
(13,500)
$54,000

30%
$30,000
-

Allowance

$ 4,800
$30,000
- .
$30,000
( 9,000)
$21,000

22,500
$27,300

Depreciation allowance/charge for the old van for 2009/10:

Reducing value
Less: Sale proceeds (trade-in value)
Balancing allowance /(charge)

$4,000
(5,000)
$(1,000)

Depreciation allowance for the new van for 2009/10:

Capital payment made: $10,000 + $5,000 + $1,000 x 3 x $25,000/$30,000
= $17,500
Allowance
Cost (cash price)
Less: Initial allowance (60% x $17,500)
Annual allowance (30%)
Reducing value c/f

TA_U10_DA_Plant

$40,000
(10,500)
$29,500
(8,850)
$20,650

$10,500
8,850
$19,350

Answer 24
Wong Company
Calculation of Depreciation Allowances
Year of Assessment 2009/10

WDV b/f
Additions:
Office furniture
Air-conditioning units
Less: Initial allowance
20% Pool ($120,000 x 60%)
Addition:
Motor vehicle (Note 1)
Disposals:
Air-conditioning units
Less: Annual allowance
WDV c/f
Allowances

20% Pool
$
300,000

30% Pool
$
200,000

100,000
20,000
420,000

200,000

(72,000)
348,000

200,000

348,000

21,000
221,000

(8,000)
340,000
(68,000)
272,000

221,000
(66,300)
154,700

72,000

134,300
206,300

Depreciation allowance for Hire Purchase asset

Total Allowances

28,333
234,633

Notes:
1.

The capital expenditure incurred for the motor vehicle which is to be added to the
pool is the actual cost of the asset less a notional annual allowance since
acquisition - S.39B(6). It is calculated as follows:
Actual cost on 1.8.2008
Less: Notional allowance for 2008/09 (30%)
Value for tax purposes

$30,000
(9,000)
$21,000

No notional initial allowance is to be deducted

No initial allowance is due for 2009/10
2.

As the spinning machines are used in Wongs textile manufacturing business, they
are prescribed fixed assets under section 16G. Hence, capital expenditure of
$300,000 ($30,000 x 10) can be deducted by virtue of S.16G in 2009/10.

TA_U10_DA_Plant

3.

The computerised weaving machine also qualified as prescribed fixed asset. The
capital expenditure of $100,000 would be deductible under S.16G in 2009/10.
However, as the machine was sold in the same year of assessment, the sale proceeds
of $100,000 (restricted to the deduction granted) would be deemed as a trading
receipt under S.16G as well.

4.

Initial allowance for HP asset:

Deposit
Capital portion of installments made
$10,000 x 260,000/(10,000 x 36)

40,000
7,222
47,222

I.A. at 60%

28,333

No A.A. as the asset has not yet put into use.

TA_U10_DA_Plant

Answer 25
Depreciation Allowances
for the year of assessment 2007/08
10%
20%
$
$
WDV at 1.4.2007
Additions:
Furniture
Less: IA
Truck
Less: IA

1,550,000

205,000

30%
$
1,580,000

150,000
(90,000)

Motor car (Note 1)

1,550,000
Disposals:
Furniture
Truck
Motor car

265,000

90,000
100,000
(60,000)

60,000

58,800
1,678,800

150,000

(45,000)
(64,000)
1,569,800
(470,940)
1,098,860

677,140
827,140

(9,000)

1,550,000
(155,000)
1,395,000

Less: AA
WDV carried forward

256,000
(51,200)
204,800

Add: Depreciation allowance for hire-purchase computer (Note 2)

Depreciation allowance for hire-purchase machinery (Note 4)

35,520
471,600
1,334,260

Depreciation Allowances
For the year of assessment 2008/09
10%
20%
$
$
1,395,000
204,800

30%
$
1,098,860

1,395,000
(375,000)

204,800
(125,000)

428,400
1,527,260
-

1,020,000
(102,000)
918,000

79,800
(15,960)
63,840

(80,000)
1,447,260
(434,178)
1,013,082

WDV at 1.4.2008
Add: Transferred from hire
purchase machinery (Note 4)

Less: Insurance
Market value of car taken out
for partly for private use
Less: AA
WDV carried forward

Add: Depreciation allowance for hire-purchase computer (Note 2)

Depreciation allowance for assets partly used for private purposes
(Note 3)

TA_U10_DA_Plant

Total
$

Total
$

552,138

23,184
16,000
591,322

Note 1:
Private car (30%)
$
120,000
(36,000)
84,000
(25,200)
58,800

Original cost
Less: Notional allowance (2005/06)
Less: Notional allowance (2006/07)
Deemed cost

Note 2:
Depreciation allowance for hire-purchase computer (30%)
$
Cost
68,000
Less: Initial allowance (20,000+4,000 x 4) x 60%
(21,600)
46,400
Less: Annual allowance
(13,920)
WDV as at 31.3.2008
32,480
Less: Initial allowance (4,000 x 8) x 60%

(19,200)
13,280
(3,984)
9,296

Less: Annual allowance

WDV carried forward

$
21,600
13,920
35,520 (2007/08)
19,200
3,984
23,184 (2008/09)

Note that hire-purchased computer cannot qualify for deduction under S.16G.

Note 3:
Asset used partly for private purposes - Motor car (30%)
$
Market value
80,000
restricted to $16,000 (2008/09)
Annual allowance
(24,000)
WDV carried forward
56,000

Note 4:
Depreciation allowances for hire purchase machinery (30%)
$
$
WDV b/f
900,000
I.A. ($40,000 x 12) x 60% (288,000)
288,000
612,000
A.A. at 30%
(183,600)
183,600
WDV c/f
428,400
471,600
Total allowances for hire purchase machinery for 2007/08 is $471,600; the WDV of
$428,400 will be transferred to 30% pool in the year 2008/09 as the last installment was
made on 31.3.2008 and the title of the machinery was then transferred to Mr. Wongs
business.

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