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Written down value - why so low in accounts?

  • 20-03-2014 02:11PM
    #1
    Ann Landers
    Closed Accounts Posts: 817 ✭✭✭


    Hi all,

    I'm grappling with college taxation material at the moment.

    I'm working out corporation tax computation and am stumped on NBVs. I can't scan my college manual so found a CPA exam paper and solutions which up the same question for me:

    http://www.cpaireland.ie/docs/default-source/Students/F2-Taxation/august-2011.pdf?sfvrsn=0

    Question One, Note 1
    Notes:
    (1) In June 2010,Anglo Mania Ltd.sold a delivery van for €12,000.The van had been bought in December 2006
    for €30,000 and had a net book value at the date of sale of €6,000.

    That had me confused. Why would the NBV value be so low, surely it should be 15,000? Which is exactly what they say in the workings:
    Van disposal bought in 2006 for €30,000. W&T 30,000 * 12.5%
    3,750 for 4 years = €15,000
    TWDV 15,000
    Proceeds 12,000
    Ba lAllow 3,000

    So, if the NBV is 15,000, why have they said it is 6000? :confused:


Comments

  • #2
    Valetta
    Closed Accounts Posts: 2,611 ✭✭✭Valetta


    Net Book Value (NBV) is for accounting puropses.

    The write-down value for taxation purposes is different.

    By the looks of it the depreciation method for accounts is 20% Straight Line.

    It would have been depreciated by €6,000 (20% of cost) over 4 years, giving the value for accounts of €6,000.


  • #3
    Ann Landers
    Closed Accounts Posts: 817 ✭✭✭Ann Landers


    Valetta wrote: »
    Net Book Value (NBV) is for accounting puropses.

    The write-down value for taxation purposes is different.

    By the looks of it the depreciation method for accounts is 20% Straight Line.

    It would have been depreciated by €6,000 (20% of cost) over 4 years, giving the value for accounts of €6,000.

    Thank you so much, duh, it never crossed my mind. :)


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