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Calculating amortization for tax purposes using the Capital Cost Allowance system. 1) Und

Calculating amortization for tax purposes using the Capital Cost Allowance system.

1) Under CCA rules, salvage value is

A) added to the straight-line amortization

B) subtracted from the cost of the asset

C) ignored

D) added to the cost of the asset

2) A tractor costing $80,000 plus HST of 13% is amortized using CCA rules. The tractor qualifies for the 30% rate, and has a scrap value of $20,000. What is the CCA allowed for year 2?

A) $16,800

B) $20,400

C) $12,600

D) $14,238

3) According to the capital cost allowance (CCA), what is the amortization rate for computer software?

A) 20%

B) 100%

C) 5%

D) 45%

4) Liverpool Co. purchased a new specialty computer in August 2010. Their fiscal year ends in November each year. This asset cost $5,000 plus HST of 13% and is expected to have a disposal value of $1,000 in three years' time. The computer falls into the new class of assets (for CCA purposes) that has a rate of 55%. What is the maximum CCA amount the company can claim in the first year?

A) $1,667.

B) $1,375.

C) $1,000.

D) $1,500.

5) For tax purposes, residential real property is written off using the straight-line method under CCA rules.

6) Under CCA rules, furniture is depreciated over five years using the 20% rate.

7) Under capital cost allowance (CCA), automobiles are amortized at a 30% rate.

8) For tax purposes, according to GAAP rules, each company can select the amortization method it wants to use.

9) For tax purposes, the capital cost allowance (CCA) must be charged each year against its taxable income.

10) Only companies that purchase an asset in the last six months of their fiscal year are subject to the half-year rule when computing maximum CCA.

11) A company may deduct as much CCA as they choose, up to the maximum allowed for a given year.

12) Some smaller companies may choose to use the CCA method for accounting purposes.

13) Two methods that ignore the salvage value are ________ and ________.

14) For tax purposes, ________ establishes the guidelines and the percentages for amortization.

Dec 07 2019 Read more Less More

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