ACB21103 TAXATION 1

TUTORIAL: CAPITAL ALLOWANCE

QUESTION 1

The following asset was recorded in Megabond Sdn Bhd’s fixed asset register on
the closing date 30 September 2020.

Machine A

RM
Cost of machine 280,000
Cost of alteration to the existing building for the installation of 33,600
the machine
Incidental costs of installation 2,400

Required:

a) Compute the capital allowances of the asset for all the relevant years of
assessment until the year of assessment 2022.

b) State the conditions and the compliance requirements that must be met in
order to qualify for a claim of an initial and/or annual allowance on capital
expenditure incurred by a person in respect of his business.

QUESTION 2

The following transaction (related to capital expenditure incurred) was extracted

from AZ Enterprise business record:

Date of Cost
Asset
purchase (RM)
28/02/2020 Van 88,000
01/10/2021 New heavy machinery
(Includes cost of building alteration of 65,000
RM10,500 to install the machine)
11/11/2021 New light machinery from Taiwan
Down payment 15,000
Installment (including interest of RM13,625) 79,625

1
Additional information:

The van is normally use for business purposes. Occasionally, the owner uses this
van for his private matters. It was agreed by the Inland Revenue Department that
15% of the usage is for private purposes. The van was sold for RM67,000 on
31/3/2022.

Calculate the capital allowance and residual expenditure of the above assets for
relevant years until year of assessment 2022.

QUESTION 3

Toys Sdn Bhd makes up its accounts annually to 31 December. Below are details
relating to the fixed assets of the company:

1. In January 2020, Toys Sdn Bhd acquired a moulding machine which cost
RM320,000 including cost of site preparation of RM35,000. The machine was
disposed in August 2022 for RM180,000.

2. In September 2020, Toys Sdn Bhd acquired a delivery truck under hire purchase
agreement as follows:

Cash price RM230,000

Down payment paid RM100,000
Hire Purchase price (including interest) RM257,300
Hire Purchased interest RM27,300

Term of payment 84 months (the first instalment was paid on 30 September

2020)

3. Toys Sdn Bhd purchased a photocopy machine costing RM85,000 in March

2021. However, due to its limited function, the machine was traded of in
September 2022 for RM50,000 with a new machine that cost RM100,000. The
different in cost was paid by cash.

Required:

Compute the capital allowance, residual expenditure and the balancing

allowance or balancing charge in respect of the assets acquired and disposed
of during the year from the year of acquisition up to the year of assessment 2022.

2
QUESTION 4

AQUA Sdn. Bhd. has the following assets as recorded in its fixed asset register for
the year ended 31 October 2021:

Assets Date of purchase Cost Rate

(RM) (Annual Allowance)
Machine A 30 November 2018 80,000 14%
Computer A 1 December 2020 6,000 40%

Additional information:

i- On 1 April 2021, the machine A was sold at a price of RM35,000 and a new
machine B, was purchased on hire purchase basis costing RM220,000. The
cash price is RM180,000 and the company paid a deposit of RM20,000. The
balance will be paid each month starting from 1 May 2021 for 80 months.

ii- On 30 June 2022, Computer A was traded in for a new one costing RM4,500.
The cash paid for the new computer was RM1,000.

Required:

Compute the capital allowances, balancing charges and balancing allowances

(if any) for AQUA Sdn. Bhd. for all the relevant years of assessment until the year
of assessment 2022.

3
QUESTION 5

WARNA Sdn. Bhd. operates in the trading of an instant food. It closes its account
to 31 December every year. The following information was available for the year
ended 31 December 2022:

Annual
allowance

i) A truck costs RM150,000 acquired by cash in March 2022. 20%

ii) Machinery
- Cost RM120,000 14%
- Deposit paid RM20,000
- Acquired under hire purchase agreement at 5% interest
per annum. The total sum to be repayable in 60 equal
installments with effect from May 2022.

iii) Car- Proton X70

- Acquired at cost RM110,000 in year 2021 under hire 20%
purchase with 60 equal monthly installments.
- RM30,000 down payment was paid.
- Payment of installment was begun in January 2021.
- Use by a marketing manager
iv) Computer
- acquired by cash for RM6,500 in January 2022 14%
- Disposed of in November 2022 for RM5,000.

Compute the capital allowance, balancing allowance/charge and residual

expenditure for the year of assessment 2022.