Cheung & Chan Ltd (CC) carried on a trading business in Hong Kong. CC operated a head

office in Hong Kong and maintained a branch in Taiwan. While all profits of the Hong Kong

head office were returned as assessable profits, all profits of the Taiwan branch were agreed

by the Inland Revenue Department as not derived from Hong Kong. CC makes up its

accounts annually to 31 December.

The tax written down values brought forward from 2018/19 in respect of the plant and

machinery of the business were as follows:

20% Pool

$1,440,000

30% Pool

$960,000

The following information was extracted from its fixed assets register for the year ended 31

December 2019:

Date

Particulars

1 January 2019

CC purchased a computerised production system at a cost of $200,000.

The system was used by a sub-contractor of CC to manufacture goods in

Hong Kong.

15 March 2019

CC sold an office equipment at a price of $120,000. The acquisition cost

of the equipment was $160,000. The accounting net book value as at 31

December 2018 of the equipment was $80,000.

1 May 2019

The Taiwan branch transferred a car to the Hong Kong head office. The

Taiwan branch acquired the car in November 2018 at a price of

$1,200,000.

The Hong Kong head office transferred certain office furniture to the

Taiwan branch. The market value of the furniture was $200,000 in May

2019. The furniture was acquired in June 2017 at a price of $200,000,

with accounting net book value of $240,000 as at 31 December 2018.

1 July 2019

CC bought a second-hand air pollution control machine (30% pool, if

applicable) on hire purchase terms (cash price $800,000). A down-

payment of $200,000 was paid on 1 July 2019. The monthly instalment

was $48,000 (fifteen instalments, with the first instalment due on 1 July

2019). Initial repair expense of $48,000 was paid for obtaining the

operating permit from the government. Also, installation costs of $60,000

was incurred.

Required:

For the purposes of Hong Kong profits tax, compute the depreciation allowances and other

deductions, if any, to which CC was entitled to for the year of assessment 2019/20. Show all

your workings. Explanatory notes writing is NOT required. Use the table in the Answer

Book to write your answer.