CIMA Exam CIMAPRA19-F01-1 Topic 1 Question 63 Discussion

An entity purchased an asset for $375,000 on 1 November 20X0 incurring legal fees of $33,000. Improvements were made to the asset for $65,000 on 1 December 20X2 which qualified as capital expenditure under the local tax rules. The entity also incurred repair costs on the asset on 1 February 20X3 amounting to $10,000.

The asset was sold for $680,000 on 1 December 20X5 incurring allowable costs on disposal of $15,000.

Indexation on the purchase cost and the improvement are allowable.

The index increased by 20% between November 20X0 and December 20X5,15% between December 20X2 and December 20X5 and 10% between February 20X3 and December 20X5

Calculate the chargeable gain on the disposal of the asset on 1 December 20X5.