John, a farmer, constructed a farmhouse on 2 January 2005 for
Sh.6,000,000 and incurred the following additional expenditure:
Sh.
2.1.2005
30.6.2005
30.9.2005
30.10.2005
Cattle dip
Irrigation system
Labour quarters
Milking machinery
1,000,000
1,500,000
2,400,000
1,120,000
John sold the farm on 2.1.2006 to his brother, Peter, who is also a
farmer. Their sale agreement contained the following particulars:
Sh.
Cattle dip
Farmhouse
Irrigation system
Milking machinery
Labour quarters
1,200,000
6,700,000
1,200,000
980,000
2,800,000
Required:
Calculate the capital deductions due to John and Peter for the years
2005, 2006 and 2007.
(15 marks)