Tutorial Capital Allowances (Plant, Machinery & Building)

1. High Rise Sdn. Bhd. which prepares its accounts to September 30 annually, carries on a shoe
manufacturing business in a rented factory up to August 31, 2017. In June 2017, it completed the
construction of its own factory and office premises and commenced manufacturing operations in its
new building on September 1, 2017. 12% of the total floor space of the factory building was used as
an office and showroom. The details of its expenditure on plant and machinery for the year ended
September 30, 2017 are as follows:
RM
(1) Heavy plant and machinery installed at factory
New Plant and machinery 120,000
Installation cost of new plant and machinery 10,000
(2) Office/showroom
Office equipment 20,000
Furniture and fittings 18,000
(3) A new motor vehicles
A new motor car (acquired by hire purchase on February 1,
2016)
Cash Price 108,000
Deposit 48,000
Hire purchase loan 60,000
Amount of each instalment
(There were 24 monthly instalments commencing in
February 2016) 2,850
Lorry (acquired by cash on August 1, 2016) 140,000
*The lorry was sold on September 26, 2017 for RM98,000
Required:
Computed the capital allowances due to the company in respect of its plant and machinery for all
the relevant years of assessment up to the year of assessment 2017.

2. Hotel (M) Sdn Bhd (y/e 31 December) operates a five-star hotel in Langkawi since 2009. The
following capital expenditure was incurred by the company for the purposes of its business:
1) Hotel equipment fixtures and fittings incurred for the year ended 31 December 2017
amounted to RM6.8 million, including fixtures that were used for administrative
purposes of RM800,000.
2) Crockery and glassware, bedding and linen totalling RM800,000 were replaced during
the year 2017.
3) Chandelier imported in February 2017 totalling RM1 million. The company suffered a
loss on foreign exchange of RM100,000 on the purchase.
4) Additional hotel musical equipment was acquired during the year on a hire purchase
financing arrangement. The company made a down payment of RM150,000 and a total
installment of RM42,500 (including an interest cost of RM5,000) during the year.
5) In February 2017, 2 vans costing RM160,000 were transferred from Holdco Sdn. Bhd.
and used in Hotel business. The vans were all acquired in January 2017 by Holdco and
were registered in its name and paid for by Holdco.
6) In April 2015, the company purchased a new Honda Accord costing RM140,000.
However, the car was registered under the name Nick (staff of the company). The car
was used in the company’s business but it was subsequently sold to Nick in December
2017 for RM63,000.
7) The company also maintains a foreign branch office in Wonderland. On 1 July 2017,
office equipment were transferred to the hotel from Wonderland. The total book value

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and market value of the assets as at 1 July 2017 were RM14,000 and RM18,000
respectively.

Required:
(a) Explain with reasons, whether the Hotel qualifies for capital allowances for the
following:-
(1) The two vans transferred from Holdco Sdn. Bhd.
(2) The Honda Accord car registered under the name Nick.
(5 marks)
(b) Compute capital allowances and balancing charge/allowance for year of assessment 2017.
(13 marks)

3. Superbtub Sdn. Bhd. has been in business for several years manufacturing plastic containers, and
closes its accounts to 31 December each year. During the year 2017, it purchased plant and
machinery (general) costing RM162,000 and spent another RM56,000 in alterations to the
building to install the said plant and machinery in the factory.
The company also extended the showroom at a cost of RM150,000 and equipped it with a new set
of furniture and fittings costing RM27,000. The company also acquired a mini lorry for the
transport of the manufacture goods, costing RM149,000. It paid a down payment of RM80,000
and the balance was financed by a hire purchase loan from a finance company. The company is
required to pay RM2,600 over the next 30 months, commencing on 1 October 2017.
The company also acquired for cash a new motor car for the use of the company director. The car
cost RM160,000 in May 2017. The new car however met with an accident in November 2017 and
was written off. The company recovered a sum of RM128,000 from the insurance company.
Required:
Compute the capital allowance or charges due to the company in respect of the various
expenditure incurred for the year of assessment 2017. Your answer should include explanations
for any adjustments made in arriving at the allowance or charges.
(10 marks)
4. GATE Sdn Bhd has a year end as at 30 September, purchased on second hand motorcar under hire
purchase for its business in July 2014. The cash price of the motorcar was RM160,000. The
company traded the old car for RM22,000 and agreed to pay a monthly instalment of RM2,400 for
72months, commencing on 1 August 2014.
Required: compute the QE, RE, CA for the relevant YAs. (10 marks)

5. Ideal Sdn Bhd (year end 30 June annually) is registered with the Royal Malaysian Customs. The
company bought the following non-current assets to be used in its business:

1. Van cost RM210,000 for transportation of goods ordered by customers around Klang
Valley. The van was acquired cash on 3 July 2016.
2. Toyota Camry to be used by the Sales Director was acquired under hire purchase Cost
RM190,800 deposit of RM40,000 was paid on 17 September 2016 and the balance was to
be paid by 25 equally installments, the first installment was paid on 5 October 2016. The
hire purchase price was RM233,200.
3. Heavy Machinery cost RM380,000, the installation cost incurred was RM10,000 and the
cost of site preparation to install the machine was RM44,000

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4. The company also acquired 3 units of printers at RM1,100 each and a portable air
conditioner at a cost RM1,050. The company claim as small value asset

Required:
Compute the amount of Schedule 3 allowances available to the company for YA 2017.
(12 marks)
6. Puncak Sdn Bhd is an established trading company that has a financial year end of 30 June, annually.
During the year ended 30 June 2017, Puncak Sdn Bhd acquired the following additional assets for
cash:
RM
Van 120,850
Motor car 183,050
Computers 45,000
Photocopy machine 8,000

The photocopy machine was acquired on 10 October 2016. After a few months’ use in the business,
it was found to be unsuitable and was sold on 28 June 2017 for RM5,500.
Assets that were brought forward from the year of assessment 2016 are as follows:
Cost Residual expenditure brought forward
RM RM
Filing cabinets 12,000 7,200
Mobile phone 1,500 1,050
Projector 23,000 13,800
The projector was disposed of in February 2017 for RM26,000. All assets (except van and motor car)
are treated as office equipment.
Required:
(a) Compute the capital allowances for Puncak Sdn Bhd for the year of assessment 2017,
together with the amounts of residual expenditure carried forward.
(15 marks)
(b) Compute for Puncak Sdn Bhd, the balancing charge/allowance in respect of each of the
disposals (the photocopy machine and the projector) in the year of assessment 2017. (6 marks)

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Tutorial Capital Allowances (Plant, Machinery & Building)

Solution

QUESTION 1
Basis period – 1/10/2016 – 30/9/2017

Heavy plant and machinery

New plant and machinery 120,000
Installation cost 10,000
Aggregate costs 130,000
YA 2017
IA (20%) (26,000)
AA (20%) (26,000)
RE 78,000

Office equipment
QPE 20,000
YA 2017
IA (20%) (4,000)
AA (10%) (2,000)
RE 14,000

Furniture and fittings

QPE 18,000
YA 2017
IA (20%) (3,600)
AA (10%) (1,800)
RE 12,600

Motor vehicle
QPE of non-commercial motor vehicle is restricted to RM 100,000 as cost less than RM 150,000
Capital portion per instalment = (108,000 – 48,000)/24 = 2,500

YA 2016 Acc. QPE

Deposit 48,000
Instalment (2500 x 8 months) 20,000
68,000 68,000
IA (20% x 68,000) (13,600)
AA (20% x 68,000) (13,600)
40,800

YA 2017
Instalment (2500 x 12) 30,000 98,000
IA (20% x 30,000) (6,000)
AA (20% x 98,000) (19,600)
45,200
Lorry
QPE 140,000
YA 2016
IA (20% x140,000) (28,000)
AA (20% x140,000) (28,000)
RE 84,000

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Tutorial Capital Allowances (Plant, Machinery & Building)

YA 2017
Disposal price 98,000
Balancing charge 14,000

Balancing charge restricted to Capital allowances claimed = RM 56,000

QUESTION 2 - refer to BPP practice and revision kit (Q63)

QUESTION 3
Basis period – 1/1/2017 to 31/12/2017

General Plant and machinery

Cost 162,000
Alteration to building 56,000
QPE 218,000
YA 2017
IA (20%) (43,600)
AA (14%) (30,520)
RE 143,880

Showroom
Non-industrial building. Does not qualify as QBE thus not qualify to claim industrial building
allowance.

Furniture and fittings

QPE 27,000
YA 2017
IA (20%) (5,400)
AA (10%) (2,700)
RE 18,900

Mini lorry
Capital portion per instalment =(149-80)/30 = 2,300

Deposit 80,000
Instalment (2300 x 3) 6,900
86,900
YA 2017
IA (20%) (17,380)
AA (20%) (17,380)
RE 52,140

Motor car
Cost of car when new RM 160,000 >150,000 therefore the QPE is restricted to RM50,000

QPE 50,000
YA 2017: May
IA (20%) (10,000)
AA (20%) Nil
RE 40,000

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YA 2017: Nov
Disposal (128,000x 50/160) (40,000)
Nil

Question 4

RM
Cash price 160,000
(-) deposit (22,000)
Capital portion of all installments 138,000
No of instalments 72
Capital portion for each instalments 1917 monthly and last instalment is RM1,893
QE is restricted to RM50,000 for second-hand non-commercial vehicle
YA 2014 Acc QPE
Deposits 22,000
Instalments (2x1,917) 3,834
QE 25,834 25,834
(-) IA (25,834 x 20%) (5166.8)
(-) AA (25,834 x 20%) (5166.8)
RE 15,500.4
YA2015
Additional QE 23,004 48,838
(-) IA (23,004 x 20%) (4,600.8)
(-) AA (48,838 x 20%) (9,767.6)
RE 24,132
YA2016
Additional QE 1,162 50,000
(-) IA (1,162 x 20%) (232.4)
(-) AA (50,000 x 20%) (10,000)
RE 15,061.6
YA2017
(-) AA (50,000 x 20%) (10,000)
RE 5,061.6
YA2018
(-) AA (24,166 x 20%) (4,833.2)
RE 228.4
YA2019
(-) AA (1,162 x 20%) restricted (228.4)
RE Nil

Question 5

YA2017 (1/7/16 – 30/6/17)

1. Van RM
3/7/16 QPE 210,000 
IA 20% (42,000) 
AA 20% (42,000) 
RE 126,000

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2. Toyota Camry
Cost 190,800 > 150,000,  Therefore, QPE = 50,000
RM
Deposit 40,000
Installment
(9/25 x 190,800 – 40,000) = 54,288
Total cost paid 94,288

QPE restricted to 50,000

IA 20% (10,000)
AA 20% (10,000)
RE 30,000

3. Heavy Machinery RM
Cost 380,000 
Installation 10,000 
390,000
Site preparation 44,000
Total Cost 434,000
SP = 44,000 x 100 = 10.1% > 10%
434,000 
RM
Therefore, QPE = 390,000 
IA 20% (78,000) 
AA 20% (78,000)  156,000
RE 234,000

4. SVA : Printers (1,100 x 3 units) = 3,300 

Aircond 1,050 
QPE 4,350
100% Special Allowance  (4,350) 
RE NIL

Question 6

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