1. Tax payer disposed an asset encumbered by debt amounted to SAR 120,000 but Its market value is SAR 100,000 with cost base of SAR 80,000 .What is the gain or loss on the disposed asset?

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2. Tax payer converted an asset used in the activity to his personal use with a cost base of SAR 50,000 and market value of SAR 40,000. What is the gain or loss on the disposed asset and whether gains or losses taken into consideration when determining tax base?

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Tax payer incurred expenses of SAR 10,000 to alter and improve equipment with a cost base of SAR 100,000. Are these expenses deductible under article 18 of the law? (2.5 marks)

Answer:

Tax payer recorded the following journal entry 

1. 
   

D r. Bad debt expense 10,000

Cr. Provision for doubtful receivable 10,000

Required: Is that provision deductible under article (14) of the law ?

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2. 1n 2020

D r. Accounts receivable (Ibrahim) 100,000

Cr. Sales 100,000

In 2021

D r. Bad debt expense 20,000

Cr. Accounts receivable Ibrahim)

Required: Is that bad debt expense deductible under article (14) of the law?

Answer:

 In financial accounting tax payers can choose any depreciation rates for depreciable assets ,but when tax payers prepare their tax base , they must apply depreciation rates according to article (17 ) of the income tax law, So, explain depreciation rates according to article (17) (2.5 marks)

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