Deck 5: Capital Cost Allowance

Question 1

The calculation of amortization expense under generally accepted accounting principles and the determination of CCA to be deducted for tax purposes can be viewed as somewhat similar procedures. However, there are some differences that arise in the application of these procedures. Describe the similarities and differences between the procedures used to calculate amortization expense for accounting records and those procedures used to establish the amount of CCA to be deducted in tax returns.

Answer 1

The basic similarity between amortization and CCA procedures is that both are directed towards allocating the cost of a depreciable asset to periods of time subsequent to the year in which the asset is acquired. Even here, however, we find a difference. Amortization procedures require that this allocation period be the useful life of the asset. In contrast, CCA procedures often use periods that are longer or shorter than the life of the asset. For example, CCA procedures allocate the cost of some Class 12 assets to one year, even though the assets last considerably longer. Alternatively, the period of write-off for assets subject to declining balance procedures have an unlimited write off period.
The objectives of amortization and CCA procedures are different in that amortization procedures attempt to match amortization expense with the related revenues in order to present fairly the results of operations of the enterprise. In contrast, CCA is usually calculated in such a fashion as to minimize Tax Payable.
As far as methods are concerned, CCA procedures are limited to the use of straight line or declining balance methods with the added complications required to apply the Accelerated Investment Incentive provisions and the short fiscal period rules. Which of these methods is to be used is specified for various types of assets in the Income Tax Regulations. In contrast, amortization calculations can use a much wider range of methods and, in addition, the accountant has discretion as to the choice of methods for particular types of assets.
A final difference is in the application of the methods chosen. The CCA rules determine the maximum amount that will be allowed as a deduction for each class. If an enterprise wishes to minimize a business loss by taking less or no CCA in a particular period, there is no prohibition against deducting less than the maximum CCA. In contrast, accounting amortization must determine the amount to be deducted on a consistent basis from year to year, without being influenced by the level of income being experienced by the enterprise.

Question 2

Patents are normally allocated to Class 44 where they are subject to declining balance CCA calculations at a 25 percent rate. However, a taxpayer can elect to allocate these assets to Class 14, where they are subject to straight-line CCA over their legal life. Under what circumstances would this election be desirable?

Answer 2

The election could be useful if the patent is acquired near the end of its legal life. For example, if only three years remained, the annual write off would be one-third of the cost, resulting in larger deductions than would be the case using Class 44's 25 percent declining balance rate.

Question 3

Describe the type of items that are included in CCA Class 14.1 and give two examples.

Answer 3

Class 14.1 was established to replace, as of January 1, 2017, a balance that was referred to as Cumulative Eligible Capital. In general terms, it contains:
• goodwill;
• balances that were in Cumulative Eligible Capital prior to January 1, 2017; and
• property that is acquired after December 31, 2016 that would have been eligible capital property under the old definitions (the Income Tax Act defines this item differently but this is, in effect, the meaning of the definition). This last item is largely intangible capital assets that have an unlimited life. Examples would include purchased customer lists, the cost of licenses with unlimited lives, expenses of incorporation over $3,000 and the cost of certain government rights.

Question 4

If the government wishes to increase or decrease the rate applicable to a particular type of asset, this can be accomplished using two different approaches. Describe these approaches, indicate which you think is preferable, and explain the reason for your preference.

Question 5

For accounting purposes, assets are generally recorded at their acquisition cost. This amount would include the basic invoice cost, delivery and installation costs, and other expenditures required to make the asset available for use by the enterprise. Indicate some of the reasons why the capital cost of an asset for tax purposes may differ from the asset cost that will be recorded for accounting purposes.

Question 6

If a taxpayer has decided, in a particular taxation year, to deduct less than the maximum available CCA, he will need to decide from which classes the amount that will be deducted should be taken. How will he make this decision? Explain your conclusion.

Question 7

Capital cost allowance for each class can be calculated using the declining balance method or the straight line method, as long as it is the same method used to calculate amortization for the financial statements.

Question 8

When there is a disposition of a depreciable asset, there may be recapture of CCA. Another possibility is that a terminal loss may arise. Indicate the conditions that will result in (1)recapture of CCA, and (2)a terminal loss.

Question 9

For 2019, Class 8 acquisitions will generally be eligible for the Accelerated Investment Incentive (AccII)provisions. Prior to 2019, they were subject to the half-year rules. What will be the effect of this change on the maximum CCA that can be deducted for 2019?

Question 10

Undepreciated capital cost is decreased by government assistance received to acquire assets and increased by acquisitions of depreciable assets.

Question 11

When there is a disposition of a depreciable asset, there may be recapture of CCA. Another possibility is that a terminal loss may arise. How are these balances treated in the determination of Net Income For Tax Purposes and the UCC balance?

Question 12

A corporation with a June 30 year end begins its operations on January 1 of the current year. It acquires $50,000 of Class 8 assets on March 1. The maximum CCA for its fiscal year ending June 30 of the current year is $15,000.

Question 13

Capital cost allowance is analogous to the accounting term amortization and allocates the cost of the capital asset to current and subsequent taxation years.

Question 14

When a depreciable asset is sold or retired, the procedures used for tax purposes are usually very different than those used for accounting purposes. Describe the differences between the procedures used for tax purposes and those that would be required under generally accepted accounting principles for dispositions of depreciable assets.

Question 15

When a taxpayer acquires a photocopier to be used in producing business income, he can either allocate its cost to his general Class 8 or, alternatively, elect to allocate it to a separate Class 8. What is the potential advantage of allocating the cost of a photocopier to a separate Class 8?

Question 16

When a depreciable asset is sold, there may be no immediate tax consequences related to the sale. Indicate the conditions that must be present for this situation to occur.

Question 17

Briefly explain why it is important to take care in allocating assets to the appropriate CCA class.

Question 18

Each passenger vehicles with a cost in excess of $30,000 must be allocated to a separate Class 10.1. Other passenger vehicles are allocated to a single Class 10. Briefly describe the differences between the rules applicable to Class 10.1, and those applicable to Class 10.

Question 19

Describe the tax treatment of purchased goodwill.

Question 20

For CCA purposes, most assets are allocated to a Class that contains all of the assets of that Class. However, in some cases individual assets have to be allocated to a separate Class, resulting in multiple balances for that Class. What are some examples of this type of situation?

Question 21

An asset with a capital cost of $70,000 was sold on October 1 for $90,000. An asset was purchased on November 1 for $100,000. Maximum CCA for Class 8 is:

Question 22

If a patent is acquired near the end of its legal life, it will usually be a good idea to elect to include its cost in Class 14.

Question 23

The separate class election for photocopiers should be used only if the assets are retained and used for long periods of time.

Question 24

Use the following information to answer the questions below.
The Nelson Company has a taxation year end of December 31. On January 1 of the current year, the UCC of Class 8 was $80,000. The Nelson Company has a policy of always deducting maximum CCA. Each of the following questions deals with transactions during the current year which involved Class 8 assets. Choose the best answer for each question.
An asset with a capital cost of $15,000 was sold for $26,000 on September 1. Maximum CCA for Class 8 is:

Question 25

An asset with a capital cost of $70,000 was sold on May 1 for $90,000. An asset was purchased on May 15 for $100,000. Minimum UCC on January 1 of the following year is:

Question 26

Use the following information to answer the questions below.
The Nelson Company has a taxation year end of December 31. On January 1 of the current year, the UCC of Class 8 was $80,000. The Nelson Company has a policy of always deducting maximum CCA. Each of the following questions deals with transactions during the current year which involved Class 8 assets. Choose the best answer for each question.
An asset with a capital cost of $15,000 was sold for $26,000 on September 1. Minimum UCC on January 1 of the following year is:

Question 27

The last asset in the class, with a capital cost of $85,000, was sold on July 15 for $90,000. This would give rise to:

Question 28

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:

A)Class 44.
B)Class 10.
C)Class 53.
D)Class 8.

Question 29

Of the following pairs of terms, which pair represents terms that are analogous for accounting work and for tax work?

A)Capital Cost and Net Book Value.
B)Amortization and Capital Cost Allowance.
C)Undepreciated Capital Cost and Acquisition Cost.
D)Capital Cost and Amortization.

Question 30

Use the following information to answer the questions below.
The Nelson Company has a taxation year end of December 31. On January 1 of the current year, the UCC of Class 8 was $80,000. The Nelson Company has a policy of always deducting maximum CCA. Each of the following questions deals with transactions during the current year which involved Class 8 assets. Choose the best answer for each question.
An asset with a capital cost of $100,000 was sold on June 30 for $90,000. Also during the year, an asset was purchased for $60,000. Maximum CCA for Class 8 is:

Question 31

Recapture of CCA occurs when there is a negative balance in the class at the end of the year.

Question 32

An asset with a capital cost of $40,000 was sold for $50,000 on September 1. This would give rise to:

Question 33

Use the following information to answer the questions below.
The Nelson Company has a taxation year end of December 31. On January 1 of the current year, the UCC of Class 8 was $80,000. The Nelson Company has a policy of always deducting maximum CCA. Each of the following questions deals with transactions during the current year which involved Class 8 assets. Choose the best answer for each question.
An asset with a capital cost of $15,000 was sold for $4,000 on June 30. Minimum UCC on January 1 of the following year is:

Question 34

The last asset in the class, with a capital cost of $85,000, was sold on August 1 for $70,000. This would give rise to:

Question 35

Use the following information to answer the questions below.
The Nelson Company has a taxation year end of December 31. On January 1 of the current year, the UCC of Class 8 was $80,000. The Nelson Company has a policy of always deducting maximum CCA. Each of the following questions deals with transactions during the current year which involved Class 8 assets. Choose the best answer for each question.
An additional class 8 asset was purchased for $20,000 on April 1. Maximum CCA for Class 8 is:

Question 36

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

A)If assets remain in a CCA Class, there will not be a terminal loss in that Class.
B)Terminal losses are deducted in full in the determination of Net Business Income.
C)Terminal losses are deducted from the ending UCC to leave a balance in the Class of nil.
D)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 37

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?

A)The business will have recapture of $75,439 and a capital gain of $131,000.
B)The business will have recapture of $75,439 and a capital gain of $281,000.
C)The business will have recapture of $187,439.
D)The business will have a taxable capital gain of $281,000.

Question 38

The cost of each rental property owned by a taxpayer must be allocated to a separate CCA Class.

Question 39

Only one-half of a terminal loss can be deducted in the determination of a taxpayer's Net Income For Tax Purposes.

Question 40

Goodwill is purchased for $60,000 during the year. There are no other assets in Class 14.1. The maximum CCA that can be deducted for tax purposes for the year is $3,000.

Question 41

Which of the following statements regarding recapture is correct?

A)Recapture occurs when there is a negative UCC balance in a class at the end of the taxation year, even if there are assets remaining in the class.
B)Recapture is deductible in the calculation of business income.
C)Recapture occurs when there is a positive UCC balance in a class and there are no assets in the class.
D)Recapture occurs when there is a positive UCC balance in a class at the end of the taxation year, even if there are assets remaining in the class.

Question 42

On September 1, 2020 Carla's Company purchased a new computer for $1,600 and desktop publishing software for $400. The maximum CCA deduction for 2020 is:

A)$1,650.
B)$1520.
C)$3,000.
D)$1,800.

Question 43

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.

Question 44

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.

Question 45

During 2020 Desiderata Design Corp. purchased a new BMW for $42,000. The car is used exclusively for business use. The maximum CCA deduction for 2020 is:

A)$13,500.
B)$18,900.
C)$9,000.
D)$12,600.

Question 46

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

A)Legal fees incurred to acquire the asset.
B)Duties paid on the asset.
C)Fire and theft insurance paid on the asset.
D)Non-refundable provincial sales taxes paid on the asset.
E)An appropriate allocation of overhead.

Question 47

Dresses R Us moved into their new rented premises on January 1, 2019. The term of the lease is 10 years. $8,000 of leasehold improvements were done during January 2019 with further leasehold improvements of $4,500 completed during January 2020. The maximum amount of CCA for 2020 is:

A)$1,475.
B)$1,550.
C)$1,250.
D)$1,300.

Question 48

On September 1, 2020, 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, 2020 is:

A)$ 925.
B)$11,250.
C)$ 3,750.
D)$ 7,500.

Question 49

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

A)A delivery truck is purchased in December of the current year. The truck is not paid for until January of the following year.
B)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.
C)A delivery truck is leased during the year on a 3 year lease.
D)A delivery truck is purchased during the year on a 3 year financing term.

Question 50

Wolfe Ltd. has a December 31 year end. It purchased a Class 10.1 automobile four years ago for $38,000. On January 1, 2020, the undepreciated capital cost for this Class 10.1 was $12,900. During 2020, it was sold for $10,000. What is the effect on Net Income For Tax Purposes of this sale?

A)No effect.
B)Terminal loss of $2,900.
C)Capital loss of $2,900.
D)CCA deduction of $1,935.

Question 51

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.

Question 52

CCC Construction Company purchased three new tools during 2020 as follows: January 1 $600
March 15 $350
April 30 $470
The maximum CCA deduction for 2020 is:

A)$ 426.
B)$ 590.
C)$2,130.
D)$1,000.

Question 53

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, 2020 the UCC balance is $17,850. On August 1, 2020 the car was sold for $17,000. For 2020 tax purposes, the company will report a:

A)terminal loss of $850.
B)recapture of $850.
C)CCA deduction of $2,678.
D)CCA deduction of $2,245.

Question 54

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)$13,500.
B)$ 8,438.
C)$27,000.
D)$16,876.

Question 55

On January 1, 2020 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 2020 is $30,000. The maximum CCA deduction for 2020 is:

A)$00,000.
B)$37,500.
C)$45,000.
D)$20,000.

Question 56

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.

Question 57

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)$ 2,673.97.
B)$ 4,010.96.
C)$12,000.00.
D)$ 8,000.00.

Question 58

Curt's Consulting Company purchased a laptop computer on February 15, 2020 for $2,000. The laptop was destroyed in a fire on April 30, 2020 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, 2020 is:

A)$550 decrease.
B)$412.50 decrease.
C)$2,000 decrease.
D)$1,500 decrease.

Question 59

Amazine Inc. purchased Class 8 furniture for $4,000 in 2018. In 2020, this furniture was sold for proceeds of $1,000. The UCC balance in Class 8 was $10,300 at the beginning of 2020 and no Class 8 assets were purchased during the year. What is the UCC of this class at the end of 2020?

A)$1,860
B)$7,440
C)$9,300
D)$8,240

Question 60

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)$ 396.
B)$ 594.
C)$4,667.
D)$7,000.

Question 61

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

A)Cost of fines and penalties.
B)Cost of government rights with an unlimited life.
C)Appraisal costs associated with intangible capital assets.
D)Cost of amending the articles of incorporation of an existing company.
E)Cost of customer lists.

Question 62

Roden Ltd. has a December 31 year end. The Company leases its office space under a lease that was signed on January 1, 2016. The lease term is 5 years, with an option to renew at an increased rent for an additional 2 years. In 2016, the Company spent $74,000 renovating the premises. In 2020, changing needs require the Company to spend another $16,000 renovating the space. Determine the maximum amount of Class 13 CCA that the Company can deduct for 2020 and 2021.

Question 63

Boker Inc. has a December 31 year end. On March 1, 2020, Boker pays $375,000 to enter a franchise agreement. The life of the franchise is 5 years. Determine the maximum CCA for 2020 and the January 1, 2021 UCC.

Question 64

During 2020, the Lardly Company spent $675,000 to acquire a government license with an unlimited life. The Company's accountant, because of his limited experience with assets of this type, allocated this cost to Class 8. This error was discovered in early 2021. What was the impact of this error on the Company's 2020 deductions from business income?

Question 65

Fielding Inc. is incorporated on August 1, 2020. On September 15, 2020, the Company acquires $150,000 in Class 10 assets. The Company has a December 31 year end and no other depreciable assets are acquired before December 31, 2020. Determine the maximum CCA for the fiscal year ending December 31, 2020.

Question 66

On January 1, 2020, 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 2020, Don takes the maximum CCA deduction. On January 1, 2021, the business is sold. It is estimated that $82,000 of the sale price was for the goodwill. The resulting increase in Don's 2021 Net Income For Tax Purposes is:

A)$11,000.
B)$13,500.
C)$15,500.
D)$14,000.

Question 67

Bifor Ltd., with a taxation year that ends on December 31, has a Class 8 (20 percent)UCC balance on January 1, 2020 of $475,000. During 2020, it acquires eligible AccII Class 8 assets at a total cost of $150,000. The Company also disposes of Class 8 assets for total proceeds of $72,000. In no case did the proceeds of disposition exceed the capital cost of the assets being disposed of. Determine the maximum Class 8 CCA that Bifor can deduct for 2020, as well as the January 1, 2021 UCC balance.

Question 68

At the beginning of 2020, Marquee Inc. has two assets in Class 10. The balance in this class is $7,423. The cost of each asset in the class was $7,500. On June 30, 2020, one of the assets is sold for $7,950. There are no other additions or dispositions prior to the Company's December 31, 2020 year end. What is the effect of the disposition on the Company's 2020 net business income? In addition, determine the January 1, 2021 UCC balance.

Question 69

On January 1, 2020, Bard Ltd. has a balance in its Class 8 of $32,400. The only transaction involving Class 8 assets during 2020 was a disposition on July 12 of a group of Class 8 assets that had cost $62,300. The proceeds of disposition for these assets was $41,800. The Company's taxation year ends on December 31. What is the effect of the disposition on the Company's 2020 net business income? In addition, determine the January 1, 2021 UCC balance.

Question 70

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

A)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.
B)Appraisal costs associated with intangible business assets would be added to the Class.
C)The maximum CCA for the year is calculated as 5 percent of the ending balance in the Class.
D)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 71

Sharma Inc. has determined that, for the current year, it has Taxable Income before the deduction of CCA of $14,000. At the end of the year, before the deduction of CCA, the following UCC balances are present: There have been no additions to or dispositions from these classes during the year. It is the policy of the Company to limit CCA deductions to an amount that would reduce Taxable Income to nil. Given this policy, which class(es)should be charged for the $14,000 of CCA that will be required to reduce Taxable Income to nil? Explain your conclusion.

Question 72

Nestor Nerd paid $4,000 to purchase various computer applications software for his sole proprietorship, Nerd01 on April 1, 2020. 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?

A)$1,100
B)$1,500
C)$2,000
D)$4,000

Question 73

Barber Ltd. has a Class 10 balance of $423,000. During the current year, an asset which cost $42,000 is sold for $51,000. There are no other dispositions during the year and there are over 50 assets left in Class 10. What are the tax consequences of this disposition?

Question 74

For each of the following depreciable assets, indicate the appropriate CCA Class.
• Cash registers
• Boats, canoes, and other vessels
• Airplane runways
• Automobile (i.e., passenger vehicle)with a cost of $85,000
• Storage tanks for oil
• Residential rental property acquired in 2015 for $450,000 (Value of land equals $100,000)
• Manufacturing and processing equipment acquired in 2020

Question 75

Pointer Ltd. has determined that, for the current year, it has Taxable Income before the deduction of CCA of $40,000. It is the policy of the Company to limit CCA deductions to an amount that would reduce Taxable Income to nil. At the end of the year, before the deduction of CCA, the following UCC balances are present: There have been no additions to or dispositions from these classes during the year. Which class(es)should be charged for the $40,000 of CCA that will be required to reduce Taxable Income to nil? Explain your conclusion.

Question 76

Murray's Antiques is an unincorporated business which begins operations on May 1, 2020 and rents a store on that day. On June 1, 2020, Murray acquired Class 8 assets for $92,400. The business will have a taxation year which ends on December 31. No other depreciable assets are acquired prior to December 31, 2020. Determine the maximum CCA for the year ending December 31, 2020.

Question 77

During 2020, your company acquired a depreciable asset for $437,000 and your accountant included this asset in Class 1 at the end of the year (it was not allocated to a separate Class 1). Early in 2021, you discover that the asset should have been allocated to Class 8. What was the impact of this error on your 2020 deductions from business income?

Question 78

On January 1, 2020, Cundo Inc. has a balance in its Class 53 UCC of $750,000. During 2020, eligible assets with a capital cost of $150,000 are added to the Class. There were no disposals during the year. Determine the maximum Class 53 CCA for 2020, as well as the January 1, 2021 UCC.

Question 79

Fred opened his MacDingle Restaurant franchise on November 1, 2020. 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 2020. The Class 14.1 balance on January 1, 2021 is:

A)$47,500.
B)$49,582.
C)$46,250.
D)$49,373.

Question 80

Sunpeel Ltd., with a taxation year that ends on December 31, has a Class 10 (30 percent)UCC balance on January 1, 2020 of $900,000. During 2020, it acquires 10 eligible AccII cars at a cost of $25,000 each, for a total addition of $250,000. The Company also disposes of 8 cars for total proceeds of $120,000. In no case did the proceeds of disposition exceed the capital cost of the vehicle being disposed of. Determine the maximum Class 10 CCA that Sunpeel can deduct for 2020, as well as the January 1, 2021 UCC balance.