YZ has $40,000 of plant and machinery which was acquired on 1 June 20X1.Tax depreciation rates on plant and machinery are 25% reducing balance. All plant and machinery was sold for $24,000 on 1 June 20X3.

YZ has $40,000 of plant and machinery which was acquired on 1 June 20X1.Tax depreciation rates on plant and machinery are 25% reducing balance. All plant and machinery was sold for $24,000 on 1 June 20X3.

Calculate the tax balancing allowance or charge on disposal for the year ended 31 May 20X3 and state the effect on the taxable profit.
A . A balancing allowance of $1,500 increases taxable profit.
B . A balancing allowance of $1,500 reduces taxable profit.
C . A balancing charge of $1,500 reduces taxable profit.
D . A balancing charge of $1,500 increases taxable profit.

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Answer: D