Homework answers / question archive / McGill University School of Continuing Studies CCTX 511 / ACCT 385QUIZ - 2 1)A business has $5,000 in Taxable Income before CCA in the current year

McGill University School of Continuing Studies CCTX 511 / ACCT 385QUIZ - 2 1)A business has $5,000 in Taxable Income before CCA in the current year

Accounting

Share With

---

McGill University

School of Continuing Studies

CCTX 511 / ACCT 385QUIZ - 2

1)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:

 

A.   Claim maximum CCA on Class 8 only.

B.   Claim maximum CCA on Class 12 only.  

C.   Claim maximum CCA on Class 8 and Class 12.  

D.   Claim no CCA for the year.  

E.   Claim $2,500 CCA on Class 8 and $2,500 CCA on Class 12.

 

2.   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?

 

A.   $  4,500.

B.   $  5,625.

C.   $  9,000.

D.   $11,250.

 

3.   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?

 

A.   $   198.

B.   $   396.

C.   $1,837.

D.   $3,675.

 

4.   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?

 

A.   $2,400.

B.   $2,500.

C.   $4,800.

D.   $5,000.

 

5.   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:

 

A.   $1,088.22.

B.   $1,336.99.

C.   $4,000.00.

D.   $8,000.00.

 

6.   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?

 

A.   Robert has recapture of $44,000.

B.   Robert has recapture of $124,000.

C.   Robert has recapture of $144,000.

D.   Robert has a capital gain of $100,000.

 

7.   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?  

 

A.   Sherry has a terminal loss of $8,000.

B.   Sherry has a capital loss of $36,000.

C.   Sherry has an allowable capital loss of $4,000.

D.   Sherry has recapture of $32,000.

 

8.   Dresses R Us moved into their new rented premises on January 1, 2017.  The term of the lease is 10 years.  $8,000 of leasehold improvements were done during January 2017 with further leasehold improvements of $4,500 completed during January 2018.  The maximum amount of CCA for 2018 is:

 

A.   $1,025

B.   $1,050

C.   $1,250

D.   $1,300

 

9.   Curt’s Consulting Company purchased a laptop computer on February 15, 2018 for $2,000.  The laptop was destroyed in a fire on April 30, 2018 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, 2018 is:

 

A.   $550 decrease.

B.   $412.50 decrease.

C.   $2,000 decrease.

D.   $1,500 decrease.

 

10. On September 1, 2018 Carla’s Company purchased a new computer for $1,600 and desktop publishing software for $400.  The maximum CCA deduction for 2018 is:

 

A.   $550

B.   $640

C.   $1,000

D.   $1,800