Reference no: EM132619176

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.

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

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