Reference no: EM13488401

Question

Fireplace Restaurant is a well-established restaurant solely owned by Mr Lam. It makes up its accounts to 31 December annually. During the two years ended 31 December 2012, Fireplace Restaurant had the following transactions in respect of plant and machinery:

i Tax written-down values brought forward from year of assessment 2010/11:
10% pool 100,000
20% pool 200,000
30% pool 300,000

ii 1 February 2011 - Purchased additional tables and chairs for $360,000.

4 ACT B414 Taxation I

iii 2 March 2011 - Installed a new air-conditioning plant on hire-purchase terms as follows:

Cash price: $2,000,000
Down payment: 10%

Balance: by 12 equal monthly installments of $160,000 commencing
2 April 2011.

iv 31 March 2011 - Sold an old air-conditioning plant for $10,000. The plant was purchased in 2001 for $400,000 on hire-purchase terms, with all instalments completely paid in early 2003.

v 15 May 2011- Replaced kitchen utensils, crockery and cutlery for $180,000.

vi 1 September 2011 - Sold a bunch of assets in the 30% pool for $75,000. The proceeds of the individual assets were all less than their respective costs, except for a washer, which was bought in 2009 for $4,000, and was sold for $5,000.

vii 10 January 2012 - The sole proprietor, Mr Lam, donated his private car for the exclusive use of the business. The car was acquired in
May 2010 for $250,000. Its second-hand value as at 10 January 2012 was $70,000.

viii 12 February 2012 - Mr Lam took some furniture for his personal use. The furniture was purchased for $25,000 three years ago and had a market value of $7,600 as at 12 February 2012.

Required:

In accordance with the relevant provisions of the Inland Revenue Ordinance, determine the depreciation allowances to which Mr Lam's business, Fireplace Restaurant, is entitled for the years of assessment 2011/12 and 2012/13.