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Homework answers / question archive / Athabasca University, Athabasca - TAXX 301 CH5 1)Which of the following statements is incorrect ? Choose the correct answer

Athabasca University, Athabasca - TAXX 301 CH5 1)Which of the following statements is incorrect ? Choose the correct answer

Accounting

Athabasca University, Athabasca - TAXX 301

CH5

1)Which of the following statements is incorrect ?

Choose the correct answer.

A. Property acquired after? 2016, other? than: tangible? property, property that is not acquired for the purpose of gaining or producing income from a business or property or property that is included in another CCA? class, is included in Class 14.1.

B. The CCA deduction for Class 14.1 is calculated using the declining balance method.

C. The CCA deduction for Class 14.1 is calculated using the straight line method.

D. Property that is goodwill or was considered eligible capital property prior to January? 1, 2017 is included in Class 14.1.

2. Intangible capital assets are included in which CCA? class(es) for income tax? purposes?

Choose the correct answer.

A. Classes 14 and 14.1

B. Classes 10 and 10.1

C. Classes 8? & 10

D. Class 13

3. Which of the following assets would be included in Class? 10.1?

Choose the correct answer.

A. Motor? vehicles, such as? pick-up trucks, trailers and vans used to transport? goods, equipment or passengers.

B. Passenger? vehicles, such as? sedans, station? wagons, sports? cars, with a cost more than? $30,000.

C. Motor? vehicles, including passenger? vehicles, which cost less than? $30,000.

D. Passenger? vehicles, such as? sedans, station? wagons, sports? cars, with a cost less than? $30,000.

4. Capital cost allowance is the tax method of? ________.

Choose the correct answer.

A. expensing the acquisition costs of? long-lived assets over time

B. recognizing the costs associated with acquiring business capital

C. obtaining government assistance with? business-related costs

D. recording the decrease in fair market value of? long-lived assets over time

5. Most asset classes use the? ________ method in the calculation of Capital Cost Allowance? (CCA) for income tax purposes.

A. declining balance

B. ?straight-line

C. maximum allowance

D. diminishing returns

6. A proprietorship is changing its business operations and therefore sells most of its assets in class? 12; however, it continues to hold some class 12 assets. The disposition results in a credit UCC balance in class 12. Which of the following statements is? correct?

A. The credit balance is carried forward to the following year

B. The credit balance is an allowed deduction in the year

C. The credit balance represents Recapture of CCA and is included in the Business income in the current year

D. The credit balance represents Recapture of CCA and is included in the Capital Gains calculated for the current year

7. A proprietor purchases an? income-producing asset that has a class life of five years. It is the only asset the company owns. The proprietor sells the asset after four years. If the? asset's market value has declined by more than the CCA? taken, ________ for the year.

A. there will be a capital loss

B. there will be a terminal loss

C. there will be a capital gain

D. the UCC balance will be negative

8. Assume an asset class has only one asset. Prior to selling the? asset, the business has taken a CCA deduction of? $10,000 and the market value of the asset has declined? $5,000. Upon disposition of the? asset, ________ will be recognized.

A. a capital gain

B. an additional CCA deduction

C. CCA recapture

D. a terminal loss

9. Which of the following is NOT correct with respect to CCA Class? 10.1?

A. A separate Class 10.1 is required for each passenger vehicle with a cost in excess of? $30,000.

B. Disposition of passenger vehicles out of Class 10.1 cannot result in recapture or terminal? loss, instead one half of the CCA calculated is allowed as a deduction.

C. This is the CCA class for passenger vehicles with a cost in excess of? $30,000.

D. Disposition of passenger vehicles out of Class 10.1 can result in recapture or terminal loss.

10.  The capital cost allowance? (CCA) deduction for any given taxation year is? ________.

A. not an optional amount and is equal to its undepreciated capital cost? (UCC) balance multiplied by the prescribed rate indicated in the Income Tax Act

B. an optional amount equal to any selected amount that is less than or equal to the maximum CCA as prescribed in the Income Tax Act

C. equal to the amount of depreciation and amortization claimed on its financial accounting reports for the year

D. reduced by the cost of assets that have been sold or otherwise disposed of

 

11. A proprietorship has a calendar fiscal year and acquires a machine on April? 1, 2020. The machine has a cost of ?$64,000. The proprietor pays a contractor ?$18,000 to install the machine and pays a? non-refundable provincial sales tax of ?$7,000. The machinery is Class 8 equipment with a CCA rate of 20?%. Assuming that the opening UCC for Class 8 assets is? $0, what is the maximum CCA that can be deducted for this machine in fiscal year 2020??

A. ?$17,800

B. ?$24,600

C. ?$26,700

D. $8,900

12. A1A is a proprietorship that has a calendar fiscal year. The proprietorship begins operations on April? 1, 2020 and acquires a machine on December? 1, 2020. The machine has a cost of ?$26,000 and A1A incurs an additional ?$6 ,000 in expenses for installation. The machine is a Class 8 asset with a rate of 20?%. What is the maximum CCA deduction A1A can take on this asset for the April 1 to December? 31, 2020 fiscal? year?

Choose the correct answer. ?(Round your answer to the nearest? dollar.)

A. ?$9,600

B. ?$7,233

C. ?$2,411

D. ?$4,822

13. The information provided below is related to Class 8 assets for the current year 2020.

bullet Undepreciated Capital Cost? (UCC) beginning? balance: ?$110,000

bullet Cost of? additions: ?$19,000

bullet Dispositions? (reduction for? disposals): ?$8,000

The Class 8 rate is 20?%. Using only this? information, what is the maximum capital cost allowance? (CCA) deduction for the Class 8 assets during 2020??

A. ?$24,200

B. ?$27,700

C. ?$25,300

D. ?$23,100

January 1, 2019 UCC                                                                     $110,000

Add: Acquisitions during the year             19,000

Deduct disposition during the year            (8,000)                        11,000

Add: Accll [(50%)(11,000)]                                                                  5,500

CCA Base                                                                                             126,500

2019 CCA [(20%)(126,500)]                                                               (25,300)

 

14. You are provided with the following information related to class 8 assets for the current? year:

bullet Undepreciated Capital Cost? (UCC) Beginning? Balance: ?$86,000

bullet Cost of? additions: ?$4,000

bullet Dispositions? (i.e. reduction for? disposals): ?$22,000

The class 8 rate is? 20%. Using only this? information, what is the maximum capital cost allowance? (CCA) deduction for the current year for class? 8?

A. ?$17,600

B. ?$13,600

C. ?$12,800

D. ?$13,200

15. Which of the following capital purchases would be an addition to Class? 14.1?

A. a parcel of land

B. a dividend payment

C. goodwill

D. a building

16. The CCA rate used for eligible capital property and goodwill included in Class 14.1 is? ________.

A. ?10%

B. ?5%

C. ?7%

D. equal to the cost of the asset divided by the estimated life of the asset

17. A proprietorship commenced operations on May? 1, 2020 and will have a calendar fiscal year. On June? 1, 2020?, the proprietorship acquired goodwill for ?$48,000.

Using only this? information, what is the maximum CCA deduction of the goodwill for the year 2020??

Choose the correct answer. ?(Round to the nearest whole dollar as? needed.)

A. ?$2,416

B. ?$2,400

C. ?$1,611

D. ?$1,692  

18. You are provided with the following information related to Class 14.1? (assume the opening UCC balance and all transactions relate to a period of time subsequent to January? 1, 2017):

bullet Balance at beginning of the? year: ?$56,000

bullet Purchased goodwill during the year for ?$12,000

bullet Sold various intangible properties included in Class 14.1 for ?$29,000 ?(assume original cost of disposed property is greater than proceeds of ?$29,000?)

What is the maximum CCA in the? year?

A. ?$975

B. ?$2,730

C. ?$3,400

D. ?$1,950

19. Undepreciated Capital Cost? (UCC) is equivalent to which of the? following?

A. historical cost

B. amortization expense

C. acquisition cost

D. net book value

20. The amount of capital cost allowance a company takes for a given tax year? ________.

A. is prescribed within the Income Tax Regulations

B. is the median amount between the minimum allowable CCA and maximum allowable CCA

C. is any amount the company chooses up to the maximum allowable

D. is the same amount for all assets within a class

21. Which of the following tax types is included in the cost of a capital asset instead of being refunded as an input tax? credit?

A. PST

B. GST

C. QST

D. HST

22. The costs of maintenance and repair of an asset after it has been placed in service? ________.

A. is subject to the? company's choice to either expense the maintenance and repair costs of an asset or add those costs to the capital cost

B. are expensed

C. are added to the capital cost of an asset

D. are either expensed or added to the capital cost of an? asset, depending on the nature of the costs in question

23. CBZ Company has a calendar fiscal year and acquires a machine on April? 1, 2020 that costs $ 32,000. The firm pays a contractor $ 12,000 to install the machine and pays a? non-refundable provincial sales tax of $ 3,800. The machinery is a Class 8 asset with a CCA rate of 20?% and is the only asset in this class. What is the maximum CCA CBZ Company can deduct on this machine for the 2020 fiscal? year?

Choose the correct answer.

 A. $ 9,560

 B. $ 14,340

 C. $ 13,200

D. $ 4,780

24. Which of the following asset classes has the highest rate applied to the UCC balance when computing? CCA?

A. Class 12

B. Class 50

C. Class 10

D. Class 1

25. ACB Company has the following information related to class 10 assets for the current? year:

Beginning? Balance: $ 168,000

cost of? additions: $ 16,000

?Dispositions, proceeds: $ 36,000 ?(original cost equals?$56,000?)

The class 10 rate is 30?%. Using only this? information, what is the maximum CCA deduction for the current year for class 10? assets?

A. $ 44,400  (168,000+16,000-36,000)*30%

B. $ 42,600

C. $ 50,400

D. $ 40,800

26. CSC Marketing has the following information related to Class 8 assets for the year 2020.

Beginning? Balance: $ 88,000

Cost of? additions: $ 11,000

?Dispositions, proceeds: $ 3,000 ?(original cost: ?$13,000?)

The Class 8 rate is 20?%. Using only this? information, what is the maximum CCA deduction CSC Marketing can have for the Class 8 assets during 2020??

A. $ 2,400

B. $ 19,200

C. $ 20,000

D. $ 18,400

27. The following information is related to Class 14.1 assets for the year 2020.

Balance at beginning of the? year: ?$56,000

Purchased goodwill during the year for ?$19,500.

Sold various intangible propertied included in Class 14.1 for ?$10,000 ?(Assume original cost of disposed property is ?$37,000?.)

What is the maximum CCA in 2020??

Choose the correct answer. ?(Round to the nearest whole dollar as? needed.)

A. ?$3,275

B. ?$4,395

C. ?$3,513

D. ?$3,038

Jacob Cloutier is the sole shareholder of Cloutier Consulting? Ltd., which provides professional consulting services to several organizations in the oil and gas industry. Cloutier Consulting Ltd. was incorporated on September? 1, 2019?, and the corporation has selected a fiscal? year-end of December 31. The corporation leases office space in Winnipeg?, Manitoba.

It is now March 2020?, and you are preparing the corporate tax return for Cloutier Consulting Ltd. for the fiscal year ended December? 31, 2019?, which includes the first four months of operations from September 1 to December? 31, 2019. Jacob Cloutier informs you that the corporation is doing well and he has developed a strong network of clients in the oil and gas consulting industry.

 

 

Requirement 1. Determine the appropriate Capital Cost Allowance classes for each of the capital asset acquisitions.

Select the appropriate class for each asset.

Office furniture   Class 8

Electronic equipment Class 50

 Automobiles Class 10.1

 28. Requirement 2. Jacob has heard that capital assets cannot be depreciated until they are considered? "available for? use." Explain the? "available for? use" rules for tax purposes and when the capital asset purchases in the current fiscal period would be considered available for use by the corporation to Jacob.

Choose the correct statement below.

A. ?"Available for? use" generally means that the asset is purchased and delivered. Additions to a class for asset purchases are made when the asset is delivered.

B. ?"Available for? use" generally means that the asset is ready to be used for its intended purpose. Additions to a class for asset purchases are made when the asset is purchased.

C. ?"Available for? use" generally means that the asset is ready to be used for its intended? purpose, and additions to a class for asset purchases are made when the asset is available for its intended use.

D. ?"Available for? use" means that the asset has been purchased and the sale has been finalized.? However, additions to a class for asset purchases are made when the asset is available for its intended use.

Requirement 3. Calculate the maximum Capital Cost Allowance deduction that can be claimed for Cloutier Consulting Ltd. as well as the closing Undepreciated Capital Cost balances for each class at the end of 2019.

Select the classes that represent the collection of assets in the table below. Then enter the maximum Capital Cost Allowance deduction and the closing Undepreciated Capital Cost balances for 2019 for each class. ?(Round amounts to the nearest dollar. Leave unused cells? blank; do not enter? "0.")

 

 

 

29. Property included in CCA Class 14.1 consist primarily of? ________.

A. tangible property used for the production of business income

B. investments in other companies

C. land and similar? non-depreciating assets

D. intangible assets

30. For tax? purposes, intangible assets of a company are? ________.

A. not deductible for tax purposes

B. fully deductible in the year they are made

C. segregated into Class 14 or Class 14.1 based on whether the assets have limited or unlimited useful lives

D. accumulated in a single account

31. Depreciation of tangible property using CCA applies to? ________.

A. business income

B. property income

C. employment income

D. business and property income

32. With respect to intangible? assets, which of the following is? incorrect?

A. The half year rule does not apply to Class 14.

B. Goodwill is an example of an intangible asset that is included in Class 14.1.

C. Intangible assets with limited lives or that expire are included in Class 14.

D. The half year rule does not apply to Class 14.1.

33. Which of the following rates is applied to the balance in Class 14.1 to determine the maximum allowable CCA deduction for the? year?

A. ?10%

B. CCA deductions for Class 14.1 are calculated using the? straight-line basis

C. ?5%

D. ?7%

34. Assume the following information for Smart Co.? (assume the opening UCC balance and all transactions relate to a period of time subsequent to January? 1, 2017):

Beginning UCC? balance: $ 44,000

Purchased goodwill during the? year: $ 26,000

Sold various intangible properties included in Class 14.1 for $ 35,000

?(assume original cost is $ 40,000?)

What is the UCC balance at the end of the? year, assuming the maximum CCA deduction was taken in the? year?

A. $ 18,000

B. $ 33,250

C. $ 1,750

D. $ 35,000

35. Pioneer Company is incorporated and starts operations on July? 1, 2020. On October? 1, 2020?, it acquires goodwill for $ 14,000. Assuming the company has a December 31 fiscal? year-end, what is the maximum CCA for 2020??

Choose the correct answer. ?(Round the final answer to the nearest? dollar.)

A. $ 265

B. $ 529

C. $ 1050

D. $ 353

36. DRG Engineering has the following information related to Class 8 assets for the year 2020.

Beginning? Balance: $ 76,000

Cost of? additions: $ 26,000

Proceeds of? disposition: $ 19,500 ?(original cost of disposed? property: $ 39,000?)

The Class 8 rate is 20?%. Assuming DRG takes the maximum CCA deduction for this? class, what is the UCC balance of the Class 8 assets at the end of 2020??

Choose the correct answer.

A. $ 53,000

B. $ 65,350

C. $ 59,500

D. $ 71,850

37. XYZ Company purchases computer software that is not systems software during the current year. The acquisition cost is? $5,000, and the assets are Class 12 assets with no special circumstances. Using only this? information, if XYZ takes the maximum allowable CCA for the? year, what is the UCC on Class 12 assets at the beginning of the following? year?

Choose the correct answer.

A. ?$4,000

B. ?$3,500

C. ?$2,500

D. ?$0

38. Javan Co has the following related to Class 8? assets:

Beginning? Balance: ?$40,000

Javan disposes of all assets within the class during the? year, for proceeds of disposition of ?$20,000. If Javan Co has no additions for the? year, and there are no assets remaining in the class at the end of the? year, which of the following will? occur?

Choose the correct answer.

A. recapture of ?$20,000 of CCA

B. a terminal loss of ?$16,000

C. a terminal loss of ?$20,000

D. recapture of ?$16,000 of CCA

39. Recapture of CCA takes place when? ________.

Choose the correct answer.

A. CCA taken on an asset class for the year exceeds the cost of assets within the class

B. proceeds from the sale of assets for a given year exceeds the CCA taken on the asset class

C. the UCC ending balance of an asset class is negative at the end of the year AND there are no remaining assets

D. the UCC ending balance of an asset class is negative at the end of the year

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