Chapter5Solutions

Chapter5Solutions - Chapter 5 Solution 1 Cl. MB: 10% $ Mar....

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Chapter 5 Solution 1 Cl. MB: Cl. 8: Cl. 8: Cl. 10: Cl. 10.1: Cl. 12: Cl. 13: Cl. 14: Cl. 43: Cl. 45: 10% 20% 20% 30% 30% 100% S.L. S.L. 30% 45% $ $ $ $ $ $ $ $ $ $ Mar. 1, 2006 Purchases: (1) Manufacturing equipment. .............. 20,000 Tools. ........................ 16,000 Dies and moulds . ...... 8,000 Computer equip- ment/software (2) ...... 12,000 Photocopier. .............. 6,000 Office furnishings . .... 15,000 Delivery van . ............ 30,000 TV commercial video tape. ........................ 22,000 Chairs and tables. ...... 2,500 Cutlery and dishes. .... 2,000 Table linens . ............. 1,200 Automobile (3) ............ 30,000 Licence to manufacture (4) ......... 30,000 Leasehold improvements (6) ...... 9,000 Dec. 31, 2006 UCC before adjustment . ............... 6,000 17,500 30,000 30,000 49,200 9,000 30,000 20,000 12,000 1 / 2 net-amount (5) ........ (3,000) (8,750) (15,000) (15,000) (15,000) (10,000) (6,000) UCC before CCA 3,000 8,750 15,000 15,000 34,200 9,000 30,000 10,000 6,000 CCA prorated 306 / 365 days. ....................... (503) (1,467) (3,773) (3,773) (28,672) (629) (8,384) (2,515) (2,264) 1 / 2 net-amount . .......... 3,000 8,750 15,000 15,000 15,000 10,000 6,000 Jan. 1, 2007 UCC . ......... 5,497 16,033 26,227 26,227 20,528 8,371 21,616 17,485 9,736 Purchases: Brick building (7) ...... 90,000 Office furniture . ..... Disposals: Photocopier . ........... (4,000) Automobile (8) .......... (23,000) Office furnishings. .. TV commercial video tape. ..................... (18,000) Small tools . ............ (5,000) Dec. 31, 2007 UCC before adjustment . ............... 90,000 1,497 16,033 26,227 (3,277) (2,472) 8,371 21,616 17,485 9,736 1 / 2 net-amount . .......... (45,000) UCC before CCA. ..... 45,000 1,497 16,033 26,227 Nil (2,472) 8,371 21,616 17,485 9,736 CCA . ........................ (4,500) (3,207) (7,868) (3,934) (1,500) (10,000) (5,245) (4,381) Recapture. ................. 2,472 Terminal loss . ........... (1,497) 1 / 2 net-amount . .......... 45,000 Jan. 1, 2008 UCC . ......... 85,500 Nil 12,826 18,359 Nil Nil 6,871 11,616 12,239 5,355 NOTES TO SOLUTION (1) The customer lists purchased for $4,000, which are expected to be usable indefinitely, are eligible capital property. (2) She should elect [Reg. 1101(5 p )] to include the photocopier in a separate Class 8 from the office furnishings. (3) The maximum cost for Class 10.1 is $30,000 (for 2006) plus GST and PST [Reg. 7307(1)( b )]. PST would be included in the cost. GST would be refundable. There is no recapture or terminal loss on the disposition of a Class 10.1 vehicle [ssecs. 13(2) and 20(16.1)]. (4) The $30,000 licence to manufacture, based on patented information, “Tax is a Microcosm of Life on CD” expiring February 28, 2009 can be treated as: (a) a Class 44 asset with CCA claimed on a declining-balance basis at the rate of 25%, or (b) a Class 14 asset with CCA claimed on a straight-line basis over the remaining 1,095-day (3-year) life of the licence, since Regulation 1103(2 h ) allows a taxpayer to elect that the property not be included in Class 44. Because Class 14 treatment allows for a faster write-off of the cost of the licence, she should elect that the property
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Chapter5Solutions - Chapter 5 Solution 1 Cl. MB: 10% $ Mar....

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