Trump De Drum Ltd (TDT) is a company in aquacultural industry specialised in farming of aquatic… 1 answer below »

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Trump De Drum Ltd (TDT) is a company in aquacultural industry specialised in

farming of aquatic organisms. DT is considering opening a new farm in Sandy Bay.

This project would involve the purchase of 13 hectares land at a price of $1,000,000

(Note that: The land is not subject to depreciation for accounting and tax purposes).

In addition to that, the company will need to purchase eight special equiments which

cost $125,000 each. The equipments are expected to be in use for 5 years and after

that, they will be scrapped without any residual value. Each year, each of these

equipments will incur $5,000 maintenance cost. It is assumed that the farm will first

be used at the beginning of the next financial year: 1 July 2021.

Before starting this new operation, TDT will need to redevelop and renovate the

warehouse at the farm. This is expected to cost $200,000. Assume that TDT is not

able to claim any annual tax deduction for the capital expenditure to the renovation

of the building until the business is sold.

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