In: Accounting
1. Hipolito purchased a hot water system for his investment property at the invoice price of $5,900 on 11 September 2015. The costs of delivery and installation came to $450. The system was ready for use on 21 Sept 2015.The hot water system has a life of ten years. Calculate the amount of depreciation he can claim as a deduction from his income year 2015-16 using prime cost method (hint: The hot water system was used for 283 days for fiscal year 2015-16).
2. In July 2008, Chandra bought 800 shares at $3 per share. He incurred brokerage fees and stamp duty of $100. In December 2014, Chandra sold all 800 shares for $2.50 per share. He incurred brokerage fees of $75. Calculated the capital loss/gain he made from this transaction.
Prime cost method of Depreciation | ||
Cost of hot water system | 5,900 | |
Delivery & Installation | 450 | |
Total cost | 6,350 | |
Life in years | 10 | |
Depreciation each year | 635 | |
Since we are using Straight line depreciation method and the hot water system | ||
is used for more than 180 days during the year full year's depreciation will be applicable. | ||
Hence he can claim $ 635 as his tax deduction from income year 2015-16. | ||
Calculation of capital gain / loss | ||
Purchase price of shares for Chandra | 3 | |
No.of shares purchases | 800 | |
Cost of shares purchased | 2,400 | |
Brokerage and stamp duty | 100 | |
Total cost of purchase | 2,500 | |
Selling price per share | 2.5 | |
No. of shares to be sold | 800 | |
Cost of shares purchased sold | 2,000 | |
Brokerage cost | 75 | |
Total cost of sales | 2,075 | |
While computing capital gain / loss on sale of shares, borkerage and stamp duty | ||
are not considered hence there is capital loss on sale of shares | ||
Capital loss on sale of shares | -400 |