1.【Answer】A。
The replacement of an equivalent model of sofa is allowable as a deduction. It is restricted by the amount of proceeds realised by selling the first sofa.
£(4000 - 200) £3,800
The answer £5,500 allows the full cost of the enhancement of furniture. The answer £5,300 allows the cost of the enhancement of furniture less the proceeds of the first sofa. The answer £4,000 is the cost of the replacement sofa.
2.【Answer】£5,400
Depreciation and customer entertaining are not deductitble and must be added back. The amount added back is therefore £(3,000 + 2,400) = £5,400.
Staff entertaining is fully deductible (the £150 limit applies to the taxable benefit for the employees).
