Calculate the tax depreciation each year

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Question - An asset is purchased for Rs.50,000. At the end of the fourth year it will be sold for Rs.10,000. Tax depreciation is available at 25% reducing balance and corporate tax is payable 30% per annum. Corporate tax is paid in two installments, with half the tax payable in the year in which it arises, and the balance paid in following year.

Required -

1. Calculate the tax depreciation each year and the associated cooperation tax saving.

2. Illustrate the timing of the tax savings calculated in above.

Reference no: EM132618818

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