CIMA Exam CIMAPRO19-P02-1 Topic 7 Question 101 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam

Question #: 101
Topic #: 7

A company has a 31 December year end and pays corporation tax at a rate of 30%. Corporation tax is payable 12 months after the end of the year to which the cash flows relate. The company can claim tax allowable depreciation at a rate of 25% reducing balance. It pays $1 million for a machine on 31 December 20X4. The company's cost of capital is 10%.

What is the present value of the benefit of the first portion of tax allowable depreciation?

A$250,000

B$227,500

C$75,000

D$68,175

Show Suggested Answer

Suggested Answer: D

by Tamra at Sep 13, 2024, 10:02 PM

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Lashawn

4 months ago

This question is making my head spin. I need to remember to bring a calculator to the exam next time.

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Wava

3 months ago

C) $75,000

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Elmer

4 months ago

B) $227,500

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Fannie

4 months ago

A) $250,000

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Trinidad

4 months ago

Option A, $250,000? That's a lot of money for a tax deduction. I wonder if the company's accountant is trying to pull a fast one on us.

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Beckie

4 months ago

Hmm, I'm not sure about this one. Maybe I should have paid more attention in my tax accounting class.

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Micah

3 months ago

Emilio: Yes, that's correct. The present value of the benefit of the first portion of tax allowable depreciation is $250,000.

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Emilio

4 months ago

Should we use the reducing balance method at 25% rate?

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Thersa

4 months ago

I think we need to calculate the tax allowable depreciation first.

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Carey

5 months ago

But the tax allowable depreciation at a rate of 25% reducing balance means it would be $250,000.

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Cruz

5 months ago

I disagree, I believe the correct answer is B) $227,500.

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Carey

5 months ago

I think the answer is A) $250,000.

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Marla

5 months ago

I'm leaning towards Option D, $68,175 sounds like a reasonable present value calculation.

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Deeanna

4 months ago

Let's go with Option D then, it seems to be the consensus.

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Venita

4 months ago

I'm not sure, but $68,175 does sound reasonable.

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Billy

4 months ago

I'm not sure, but I'll go with Option D as well.

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Truman

4 months ago

I agree, Option D seems like the correct choice.

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Dwight

4 months ago

I think the present value of the benefit of the first portion of tax allowable depreciation is $68,175.

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Mee

4 months ago

I agree, Option D seems like the correct choice.

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Carri

4 months ago

I think the present value of the benefit of the first portion of tax allowable depreciation is $68,175.

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Meghann

5 months ago

Option B seems right, the present value of the first portion of tax allowable depreciation should be around $227,500.

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Gail

4 months ago

Great, it's good to confirm our understanding of the question.

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Sheridan

4 months ago

That makes sense. The calculation matches up with the information provided.

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Berry

4 months ago

Yes, I agree. Option B seems to be the correct answer.

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Olive

4 months ago

I think the present value of the first portion of tax allowable depreciation is $227,500.

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