Homework answers / question archive / University of California, Los Angeles - COMM 232 Quiz 5 Question1)Of the following pairs of terms, which pair represents terms that are analogous for accounting work and for tax work? Question 1 options:   1)  Capital Cost and Net Book Value

University of California, Los Angeles - COMM 232 Quiz 5 Question1)Of the following pairs of terms, which pair represents terms that are analogous for accounting work and for tax work? Question 1 options:   1)  Capital Cost and Net Book Value

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Question 1 options:

	1)  Capital Cost and Net Book Value.
	2)  Amortization and Capital Cost Allowance.
	3)  Undepreciated Capital Cost and Acquisition Cost.
	4)  Capital Cost and Amortization.

 

Question 2 

 

A business has Net Income For Tax Purposes before deducting CCA of $15,000.  It would like to reduce this total to nil after the deduction of CCA.  It can take the required $15,000 in CCA from four CCA classes, all of which have a balance of more than $15,000.  If the business wishes to maximize future CCA, the $15,000 should be deducted from:

Question 2 options:

	1)  Class 44
	2)  Class 10
	3)  Class 53
	4)  Class 8

 

Question 3 

 

A business acquires a rental property several years ago for $562,000, with $112,000 of this amount being the estimated value of the land.  At the beginning of the current year the UCC for the property is $374,561.  During the current year, the property is sold for $843,000, with $262,000 of this amount being allocated to the land.  Which of the following statements is correct?

Question 3 options:

	1)  The business will have recapture of $75,439 and a capital gain of $131,000.
	2)  The business will have recapture of $75,439 and a capital gain of $281,000.
	3)  The business will have recapture of $187,439.
	4)  The business will have a taxable capital gain of $281,000.

 

Question 4 

 

Which of the following statements with respect to terminal losses is NOT correct?

Question 4 options:

	1)  If assets remain in a CCA Class, there will not be a terminal loss in that Class.
	2)  Terminal losses are deducted in full in the determination of Net Business Income.
	3)  Terminal losses are deducted from the ending UCC to leave a balance in the Class of nil.
	4)  A terminal loss occurs when there are no assets left in the Class and there is a negative balance in the Class at the end of the year.

 

Question 5 

 

The capital cost of an asset includes a number of costs.  Indicate which cost would NOT be considered part of the capital cost.

Question 5 options:

	1)  Legal fees incurred to acquire the asset.
	2)  Duties paid on the asset.
	3)  Fire and theft insurance paid on the asset.
	4)  Non-refundable provincial sales taxes paid on the asset.
	5)  An appropriate allocation of overhead.

 

Question 6 

 

A business has $5,000 in Taxable Income before CCA in the current year.  The management anticipates a high income for the subsequent year.  The maximum CCA deductible for the year in Class 8 is $5,000 and the maximum CCA deductible for the year in Class 12 is $5,000.  To minimize the subsequent year’s taxes, the business should:

Question 6 options:

	1)  Claim maximum CCA on Class 8 only.
	2)  Claim maximum CCA on Class 12 only.
	3)  Claim maximum CCA on Class 8 and Class 12.
	4)  Claim no CCA for the year.

 

Question 7 

 

During the current year, Denos Corporation incurred costs of $45,000 for leasehold improvements to its newly rented building. The lease was signed in the current year for an initial term of three years plus four successive options to renew the lease, each for an additional one year term. Which one of the following amounts represents the maximum capital cost allowance claim in the current year?

Question 7 options:

	1)  $  4,500.
	2)  $  5,625.
	3)  $  9,000.
	4)  $11,250.

 

Question 8 

 

On December 1 of the current year, Plen Limited purchased a franchise for $70,000.  The franchise has a limited life of 15 years.  Which one of the following amounts represents the maximum amount of capital cost allowance Plen Limited can deduct for its current year ending on December 31?

Question 8 options:

	1)  $   198.
	2)  $   396.
	3)  $1,837.
	4)  $3,675.

 

Question 9 

 

In the current fiscal year, a corporation acquired a rental property from its sole shareholder.  The building was transferred at its fair market value of $125,000, but was not allocated to a separate Class 1.  The shareholder originally paid $150,000 for it.  The property was included in Class 1 (4%) on the shareholder’s tax return.  The shareholder has earned rental income on the property since its acquisition.  The undepreciated capital cost of the building at the time of the transfer was $120,000.
Which one of the following amounts represents the maximum allowable capital cost allowance that the corporation may claim for this building in the current fiscal year?

Question 9 options:

	1)  $2,400. 1
	2)  $2,500.
	3)  $4,800.
	4)  $5,000.

 

Question 10 

 

ABC Enterprises began operations on September 1 of the current year.  It has chosen December 31 as its year end.  On October 1 of the current year, the proprietorship purchased furniture and fixtures for $40,000.  The maximum capital cost allowance on the furniture and fixtures for the current year ending December 31 will be:

Question 10 options:

	1)  $1,088.22.
	2)  $1,336.99.
	3)  $4,000.00.
	4)  $8,000.00.

 

Question 11 

 

Robert bought a rental property ten years ago for $320,000, with $80,000 of the purchase price allocated to the land.  Over the ten years, he claimed CCA such that his UCC at the beginning of this year for the building was $196,000.  Robert sold the property this year for $520,000, with $180,000 of the sale price allocated to the land.  Which of the following statements is correct?

Question 11 options:

	1)  Robert has recapture of $44,000.
	2)  Robert has recapture of $124,000.
	3)  Robert has recapture of $144,000.
	4)  Robert has a capital gain of $100,000.

 

Question 12 

 

Sherry owned a rental property.  She originally acquired the property for $260,000 with $200,000 of the cost attributed to the building.  Over the years, Sherry has claimed CCA of $32,000, such that her UCC at the beginning of the year was $168,000. The rental property is the only asset in the class.  This year, she sold the property for $214,000, with $160,000 of the sale price attributed to the building.  Which of the following statements is correct?

Question 12 options:

	1)  Sherry has a terminal loss of $8,000.
	2)  Sherry has a capital loss of $36,000.
	3)  Sherry has an allowable capital loss of $4,000.
	4)  Sherry has recapture of $32,000.

 

Question 13 

 

Dresses R Us moved into their new rented premises on January 1, 2016.  The term of the lease is 10 years.  $8,000 of leasehold improvements were done during January 2016 with further leasehold improvements of $4,500 completed during January 2017.  The maximum amount of CCA for 2017 is:

Question 13 options:

	1)  $1,025
	2)  $1,050
	3)  $1,250
	4)  $1,300

 

Question 14 

 

Fried’s Factory Inc. purchased Class 29 assets for $20,000 on November 1, 2015.  The company’s fiscal year end is December 31.  The maximum CCA deduction for 2015, 2016 and 2017 will be:

Question 14 options:

	1)  $1,671 for 2015; $18,329 for 2016; $0 for 2017.
	2)  $1,671 for 2015; $10,000 for 2016; $8,329 for 2017.
	3)  $5,000 for 2015; $10,000 for 2016; $5,000 for 2017.
	4)  $10,000 for 2015; $10,000 for 2016; $0 for 2017.

 

Question 15 

 

Curt’s Consulting Company purchased a laptop computer on February 15, 2017 for $2,000.  The laptop was destroyed in a fire on April 30, 2017 and Curt’s Consulting received $500 in compensation from the insurance company.  It was the only asset in the CCA Class as all computer equipment has been leased for the last two years.  The effect on Net Income For Tax Purposes for the year ending December 31, 2017 is:

Question 15 options:

	1)  $550 decrease.
	2)  $412.50 decrease.
	3)  $2,000 decrease.
	4)  $1,500 decrease.

 

Question 16 

 

On September 1, 2017 Carla’s Company purchased a new computer for $1,600 and desktop publishing software for $400.  The maximum CCA deduction for 2017 is:

Question 16 options:

	1)  $550
	2)  $640
	3)  $1,000
	4)  $1,800

 

Question 17 

 

During 2017 Desiderata Design Corp. purchased a new BMW for $42,000.  The car is used exclusively for business use.    The maximum CCA deduction for 2017 is:

Question 17 options:

	1)  $4,500
	2)  $6,300
	3)  $9,000
	4)  $12,600

 

Question 18 

 

Several years ago, Solea Company purchased a Mercedes Benz that is used exclusively for business use.  The car is in a separate Class 10.1.  On January 1, 2017 the UCC balance is $17,850.  On August 1, 2017 the car was sold for $17,000.  For 2017 tax purposes, the company will report a:

Question 18 options:

	1)  Terminal loss of $850
	2)  Recapture of $850
	3)  CCA deduction of $2,678
	4)  CCA deduction of $2,245

 

Question 19 

 

On January 1, 2017 Jorge purchased two newly constructed rental buildings for $350,000 each.  Of the total cost of $350,000 for each building, $100,000 represents the value of the land on which the building is situated.  One building contains four suites and is rented to students.  The other building is rented to a florist business.  Each of the buildings is allocated to a separate Class 1.  Net rental revenue (before CCA) for 2017 is $30,000.  The maximum CCA deduction for 2017 is:

Question 19 options:

	1)  $10,000
	2)  $12,500
	3)  $15,000
	4)  $20,000

 

Question 20 

 

CCC Construction Company purchased three new tools during 2017 as follows:
January 1             $600
March 15             $350
April 30                 $470
The maximum CCA deduction for 2017 is:

Question 20 options:

	1)  $142
	2)  $470
	3)  $710
	4)  $880

 

Question 21 

 

Amazine Inc. purchased Class 8 furniture for $4,000 in 2015.  In 2017, this furniture was sold for proceeds of $1,000. The UCC balance in Class 8  was $10,300 at the beginning of 2017 and no Class 8 assets were purchased during the year.  What is the UCC of this class at the end of 2017?

Question 21 options:

	1)  $1,860
	2)  $7,440
	3)  $9,300
	4)  $8,240

 

Question 22 

 

Which of the following statements regarding recapture is correct?

Question 22 options:

	1)  Recapture occurs when there is a negative UCC balance in a class, even if there are assets remaining in the class.
	2)  Recapture is deductible in the calculation of business income.
	3)  Recapture occurs when there is a positive UCC balance in a class and there are no assets in the class.
	4)  Recapture occurs when there is a positive UCC balance in a class, even if there are assets remaining in the class.

 

Question 23 

 

Which of the following assets is NOT eligible for capital cost allowance in the current year?

Question 23 options:

	1)  A delivery truck is purchased in December of the current year.  The truck is not paid for until January of the following year.
	2)  An employee owns and uses a truck for employment duties during December.  His pay for December is not received until January of the following year.
	3)  A delivery truck is leased during the year on a 3 year lease.
	4)  A delivery truck is purchased during the year on a 3 year financing term.

 

Question 24 

 

On September 1, 2017, Lerner Ltd, purchased a franchise for $75,000. The franchise has a limited life of 10 years.  Lerner Ltd. has a September 30 year end.  The maximum tax deduction related to the franchise for the year ending September 30, 2017 is:

Question 24 options:

	1)  $616
	2)  $3,750
	3)  $3,938
	4)  $7,500

 

Question 25 

 

Wolfe Ltd. has a December 31 year end.   It purchased a Class 10.1 automobile four years ago for $38,000. On January 1, 2017, the undepreciated capital cost for this Class 10.1 was $12,900. During 2017, it was sold for $10,000. What is the effect on Net Income For Tax Purposes of this sale?

Question 25 options:

	1)  No effect
	2)  Terminal loss of $2,900.
	3)  Capital loss of $2,900.
	4)  CCA deduction of $1,935.

 

Question 26 

 

Nestor Nerd paid $4,000 to purchase various computer applications software for his sole proprietorship, Nerd01 on April 1 of the current year.  Nerd01 has a December 31 year end and has been operating for 3 years.  What is the maximum tax deduction that Nerd01 can claim on the software for the current year?

Question 26 options:

	1)  $1,100
	2)  $1,500
	3)  $2,000
	4)  $4,000

 

Question 27 

 

On January 1, 2017, Don Buchanan acquires a business that has goodwill.  The amount of the purchase price that is allocated to goodwill is $60,000.  The business has a taxation year that ends on December 31 and, for 2017, Don takes the maximum CCA deduction.  On January 1, 2018, the business is sold.  It is estimated that $82,000 of the sale price was for the goodwill.  The resulting increase in Don’s 2018 Net Income For Tax Purposes is:

Question 27 options:

	1)  $11,000.
	2)  $13,500.
	3)  $12,500.
	4)  $14,000.

 

Question 28 

 

Which of the following statements with respect to Class 14.1 is NOT correct?

Question 28 options:

	1)  If a disposition creates a negative balance in the UCC of the Class at the end of the year, 100 percent of the negative amount must be taken into income.
	2)  Appraisal costs associated with intangible business assets would be added to the Class.
	3)  The maximum CCA for the year is calculated as 5 percent of the ending balance in the Class.
	4)  If a business ceases to operate and there is a positive balance in the Class, it can be deducted in calculating net business income.

 

Question 29 

 

Fred opened his MacDingle Restaurant franchise on November 1, 2017.  He paid $50,000 for the franchise rights and can use them for an unlimited number of years.  The restaurant’s fiscal year end is December 31.  The maximum CCA deduction was taken for 2017.  The Class 14.1 balance on January 1, 2018 is:

Question 29 options:

	1)  $47,500
	2)  $49,582
	3)  $48,750
	4)  $49,791

 

Question 30 

 

Indicate which of the following items would not be added to Class 14.1.

Question 30 options:

	1)  Cost of fines and penalties.
	2)  Cost of government rights with an unlimited life.
	3)  Appraisal costs associated with intangible capital assets.
	4)  Cost of amending the articles of incorporation of an existing company.