The Institute of Chartered Accountants of Nigeria
Kano District & Society
NNDC ICAN STUDY CENTRE
Capital Allowances
Question One
JOHN GAB Limited commenced business as a textile manufacturing company on September 1,
2008, even though it was incorporated on 1 June 2020. Its accounts for the first few years of its
operations showed the following adjusted profits:
₦’000
Period ended 31 December 2020 37,500
Year ended 31 December 2021 60,000
Year ended 31 December 2022 90,000
The company incurred the following qualifying capital expenditure:
₦’000
5 June 2020 – land & Building 17,500
1 July 2020 – Motor car 6,000
15 October 2020 – Machinery 14,000
28 February – 2021 Furniture 3,750
1 May 2021 – Delivery van 5,000
Required:
a. Determine the basis period for assessment and for capital allowances for the three (5)
assessment years
b. Compute the Capital allowances due for THREE (3) years of assessment in respect of
the qualifying capital expenditure incurred by the company
ICAN SKILL NOV 2015 Modified
Question Two
As part of the induction Programme for the newly recruited staff of your firm of tax consultants, you
may have been saddled with the responsibility of making a presentation on company’s income tax
computation for beginners during the firms training session.
You are provided with the following information relating to Wizzy-Baddo Limited, which commenced
business on September 1, 2020.
Adjusted Profit
₦
Period to December 31, 2020 6,937,500
Year ended December 31, 2021 9,300,500
1
The following assets were acquired as follows: ₦
June 5, 2020 Land and building 5,467,500
July 1, 2020 – Motor vehicle 10,000,000
October 15, 2020 – Machinery 4,375,000
February 28, 2021 – Furniture 3,458,000
May 1, 2021 – delivery van 4,750,000
Required:
For the relevant assessment years;
a. State the basis periods for assessable profits and qualifying capital expenditure
b. Compute the capital allowances
ICAN – MAY, 2023
Question Three
Aishat shift Nigeria limited commenced business as a trading company on 1st April 2023. The results
of the business for the first three years of commencement of business were as follows:
₦
th
Period to 30 September 2023 3,359,060
Year ended 30th September 2024 23,908,620
Year ended 30th September 2025 32,565,940
Year ended 30th September 2026 22,565,940
Year ended 30th September 2027 15,454,389
The company acquired the following Qualifying Capital Expenditure:
Date Description of QCE Cost (₦)
01.02.2023 Industrial Buildings 12,000,760
01.04.2023 Plant & Machinery 4,990,000
04.07.2024 Furniture & Fittings 2,400,000
07.07.2025 Plant & Machinery 10,000,000
10.07.2025 Motor Vehicle 5,000,0000
The Industrial building was sold on 4 th of August 2025 for ₦18,000,000
Required:
a. Compute Capital allowances claimable by the company for the relevant years of
assessment
b. Compute the Balancing Charge or Allowance if any
2
Question Four
Ndayako enterprises acquired a motor vehicle with a hire purchase price of ₦3,000,000 on April 1,
2020. The hire purchase interest rate is at 10%. The customer was to settle as follows;
Initial deposit ₦1,000,000
Balance was payable in four (4) equal instalments in six (6) intervals with effect from the date of
agreement.
The company accounting year end 30th June annually. All instalment were paid on due date.
You are required to compute the capital allowance up to the end of the asset’s life.
