The cost of rede corating office premises, undertaken every four years, should be:

(a) expensed in the period pa id;

(b) expensed in the period incurred;

(c) added to the cost of premises and depreciated accordingly;

(d) expensed equally over the four years.

II . An asset originally acquired on I January 1982 at a cost of £ I00000 was depreciated on a straight-line basis over 10 years assuming a zero salvage value.

An initial allowance of 100 per cent was given for tax purposes. On 31 December 1984 the assets were sold for £30000 giving rise to

(a) a balancing allowance of £70000;

(b) a balancing charge of £70 000;

(c) a balancing allowance of £30 000;

(d) a balancing charge of £30 000.

Problems