Page 81 - Microsoft Word - 00 ACCA F9 IWB prelims 2017.docx

Investment appraisal – Further aspects of discounted cash flows

Question 7

Tax-allowable depreciation

How would your answer be different if the sales proceeds were back at $5,000
but the asset had been bought 1 day earlier, at the end of an accounting
period?
tax rate 1 year in
30% arrears

asset purchase 1st day of accounting
t0 period 25,000

Immediate tax-allowable depreciation
t0 available 6,250 1,875 t1

–––––

tax written down value 18,750
t1 2nd tax-allowable depreciation 25% 4,688 1,406 t2
–––––

tax WDV 14,062
t2 3rd tax-allowable depreciation 25% 3,516 1,055 t3

–––––
tax WDV 10,546

th
t3 4 tax-allowable depreciation 25% 2,636 791 t4
Tax WDV 7,910

t4 sales proceeds 5,000
balancing allowance 2,910 873 t5

73