Haulage Co Pte Ltd ('Haulco') conducts a transportation business carrying goods and containers.

Year One

In February (February 1 to be specific) Haulco purchases a large truck (known in the trade as a 12 wheeler) for use in its transportation business. The truck is capable of hauling heavy containers. The purchase price is $50,000. This is a part cash, part credit sale; $25,000 down and the remainder paid in 5 monthly installments of $5,000.

The 12 wheeler truck is 6 years old and has already covered 360,000 kilometers. Haulco believes that the truck is generally in good condition and should be good for another 360,000 kilometers. The only immediate work required on the truck is to replace all 12 tyres on the vehicle, these being dangerously thin. Good quality truck tyres cost $1,000 each. Haulco spends $12,000 in replacing all 12 tyres. That done, the truck is used in the company's transportation business through to the end of the year.

Year Two

The truck continues to be used in the company's business throughout the year. In June the truck is involved in a collision that damages the truck's radiator. A new radiator is installed at a cost of $5,000. Haulco submits a claim to its insurer Insuranceco who pay out $3,500. (Haulco's insurance policy with Insuranceco provides that the first $1,500 of any claim will not be paid by the insurer.)

Year Three

The truck continues to be used in the company's business up until February 11. On February 12 the truck is sold to a trade competitor for $22,000. At this time the truck has over its life covered a total of 800,000 kilometers.

Required: Deal with each year in turn.

For each year calculate the depreciation deduction (if any). Also identify any further receipts/gains or deductions (if any) that enter the calculation of Haulco's chargeable income.

Presume Haulco depreciates assets on a straight-line basis.

Answer rating: 100% (QA)

Year One Depreciation Deduction The purchase price of the truck is 50000 and it is expected to last for another 360000 kilometers Therefore the deprec... View the full answer