Chai
Limited was incorporated on 31 December 2004 to process and package tea for
sale within Kenya.  On 2 January 2005, the company purchased the
following movable assets and buildings from Mwisho Limited, an existing company
in the same business.

Asset	Tax written down value Sh. ‘000’	Selling price to Chai Limited Sh. ‘000’
Machinery Standby generator Computers Printers Loose tools (original cost Sh. 150,000) Delivery vans (3 tonnes each) Mobile phones Office furniture Weighing scales	18,000   200   750   90   100   7,200   150   1,400   30	10,000   250   400   110   70   8,000   80   1,000   28

Nature of building	Construction date	Construction cost Sh. ‘000’	Selling price to Chai Limited Sh. ‘000’
Factory Office complex Warehouse A Warehouse B Staff quarters Staff Canteen	1 January 1998 1 January 1998 1 July 1999 1 January 2000 1 August 2001 1 December 2001	40,000 22,000 2,000 1,700 3,600 900	48,000 26,000 1,800 2,400 4,000 750

The
following additional transactions occurred in the year ended 31 December 2005:

1.  On 1 March,
one of the delivery vans purchased from Mwisho Limited for Sh. 1.2 million was
sold for Sh. 700,000.

2.  As the
number of employees increased.  Warehouse
B was converted into an office with effect from 1 April.  The cost of partitioning the warehouse
amounted to Sh. 150,000.

3.  Additional
staff quarters were constructed at a cost of Sh. 800,000 and utilized from 1
July.

4.  On 1
October, a machine was imported at a cost of Sh. 450,000 and the following
costs subsequently incurred on it:

	Sh.
Import duty Carriage inwards Repairs in transit Installation costs Annual insurance	100,000 40,000 18,000 5,600 12,000

5.  One of the
computers valued at Sh. 18,000 was traded in on 2 November for a new one
costing Sh. 50,000.  The balance was
settled in cash.

6.  The company
reported a profit before capital allowances of Sh. 26 million for the year
ended 31 December 2005.  This was after
deducting depreciation of Sh. 2 million.

Required:

(a) 
Determine the capital allowances due to Chai
Limited for the year ended 31 December 2005.

 
(16 marks)

(b) 
Compute the company’s taxable profit or loss
and the tax payable (if any) for the year ended 31 December 2005.      (4 marks)