Reference no: EM133034382
Problem - A second-hand motor car which cost RM 100,000 has been used by Michael in his sole trader business since its acquisition on 19 December 2018. On 8 January 2020, Michael traded in the old motor car for a new motor car to be used in his business.
RM
Cost of the new motor car 146,000
Trade-in value of the old motor car (62,000)
Hire purchase loan 84,000
Monthly instalment inclusive of interest: RM3,600
Total number of instalments: 24
Date of first instalment: 8 February 2020
The adjusted income of Michael for the year of assessment 2020 (before any adjustments relating to the above transactions) is RM 100,000. The Inland Revenue agreed that 100% of the usage of the old and new motor car is for business purposes. Initial and Annual Allowances for motor vehicle are 20% respectively.
Required -
(i) Compute the balancing allowance/charge upon disposal of the old motor car in the year of assessment 2020;
(ii) Compute the capital allowances in respect of the new motor car for the year of assessment 2020.
(iii) Compute the statutory income of Michael's business for the year of assessment 2020. Show all your workings including balancing charge and balancing allowance.