Mwamba Ltd. was established in the year 2020 to manufacture soap for the local market. Before...

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Mwamba Ltd. was established in the year 2020 to manufacture soap for the local market. Before commencement of operations on 1 July 2020, the company spent a total of Shs. 9,760,000 to construct a factory. This cost is analyzed as below: Cost of land Land scaping Architects Fees Sewerage System Actual building cost Kshs 1,000,000 200,000 320,000 240,000 8,000,000 (including cost of showroom) Additional information: the following assets were purchased and utilized with effect from 1 July 2020. Cost (shs) 800,000 1,900,000 600,000 150,000 1,200,000 3,600,000 200,000 120,000 1,500,000 1,400,000 80,000 Power Transformer Processing machinery (including Installation cost at Shs.200,000) Bridge (Connecting factory and main road) Water pump Forklift (Mobile) Two saloons cars (Cost of each 1.8M) Computers Furniture and fixtures Pick-up Tractors Scanners One of the saloon car was written off following an accident on 1" January 2021. The insurance company paid shs.900,000 as compensation to Mwamba Itd. The following assets were purchased on 1st April 2021. Processing machinery 400,000 Office curtains 160,000 Fax machine 100,000 The processing machine was acquired on hire purchase terms. The cash price was shs 250,000. Required: Compute capital allowances due to Mwamba Itd. For each of the two years ended 31 December 2020 and 2021 Mwamba Ltd. was established in the year 2020 to manufacture soap for the local market. Before commencement of operations on 1 July 2020, the company spent a total of Shs. 9,760,000 to construct a factory. This cost is analyzed as below: Cost of land Land scaping Architects Fees Sewerage System Actual building cost Kshs 1,000,000 200,000 320,000 240,000 8,000,000 (including cost of showroom) Additional information: the following assets were purchased and utilized with effect from 1 July 2020. Cost (shs) 800,000 1,900,000 600,000 150,000 1,200,000 3,600,000 200,000 120,000 1,500,000 1,400,000 80,000 Power Transformer Processing machinery (including Installation cost at Shs.200,000) Bridge (Connecting factory and main road) Water pump Forklift (Mobile) Two saloons cars (Cost of each 1.8M) Computers Furniture and fixtures Pick-up Tractors Scanners One of the saloon car was written off following an accident on 1" January 2021. The insurance company paid shs.900,000 as compensation to Mwamba Itd. The following assets were purchased on 1st April 2021. Processing machinery 400,000 Office curtains 160,000 Fax machine 100,000 The processing machine was acquired on hire purchase terms. The cash price was shs 250,000. Required: Compute capital allowances due to Mwamba Itd. For each of the two years ended 31 December 2020 and 2021

Answer rating: 100% (QA)

To compute capital allowances for Mwamba Itd we need to determine the assets that qualify for capital allowances and the appropriate rates for each ca... View the full answer