CAPITAL ALLOWANCE – EXERCISE 4

QUESTION 1

A. Farisha Sdn Bhd operates a restaurants business in Ipoh, Perak and prepares its account
to 30 June annually. The following are the assets owned by the company.

Cutlery & cooking utensils

The company purchased the 3 sets of cutlery and cooking utensils costing RM2,500 per
set on 1 May 2019. 1 of these sets is used for replacement of the existing cutlery and
cooking utensils used in its business.

Refrigerator

On 2 March 2018, the business bought two set of refrigerators costing RM5,500 to be used
in the restaurant. Later on 10 December 2018, the refrigerators was disposed for RM4,500.

Computer software

The business purchased a computer software system costing RM10,000 on 3 January

2019. In addition, the business also incurred RM1,000 for the consultation fees related to
the software.

Chairs and Tables

The business bought 200 sets of chair and table costing RM30,000 (price per set is RM150)
on 3 April 2018.

Required:

Compute the capital allowances, balancing charges/allowances (if any) for the above
assets for all the relevant years of assessment up to year of assessment 2020.

QUESTION 2

PuMan Stay Sdn Bhd (PMSSB) is a business that rents out several units of homestay in Pulau
Langkawi. The basis period of the company ends on 31 October annually. Below is the
information regarding the assets of the company:

1. A passenger car that cost RM130,000 was acquired on 1 July 2018 by means of hire-
purchase. The company paid the deposit of RM40,000 on the same date. The first
installment was due on 1 August 2018 and the monthly installment was RM1,800. The
hire-purchase was for the period of 60 months. However, the passenger car was totally
scrapped off due to an accident on 31 March 2020. PMSSB received RM35,000 as an
insurance claim.

2. In March 2019, one of the company’s owners brought in his own massage chair to be
used in the business. He purchased the chair on 1 September 2017 for RM30,000. The

1
 market value and net book value of the chair on the day it was brought into the business
were RM18,000 and RM15,000 respectively.

3. PMSSB acquired several furniture on 1 October 2019 to be used in the business as

follows:

Item Quantity Price per unit (RM)

Tables 15 1,000

Required:

a) Compute the capital allowance, balancing allowance and balancing charges (if any) for
each asset for the relevant years of assessment up to the year of assessment 2020.

b) Briefly explain the treatment of cost of preparing site in relation to qualifying plant
expenditure.