Question

On January 3, 2017, Acme Inc. (Acme) purchased new equipment to process fresh fruit into jams and jellies for retail sale. The equipment cost $25,000, fully installed, and the amount was capitalized for accounting and tax purposes. Management estimates a residual value of zero. Acme's equipment is classified as class 43, which has a CCA rate of 30 percent declining balance. Acme's year-end is December 31.

Required:
a. What is the maximum amount of CCA that could be claimed for tax purposes in 2017? Explain.
b. What is the maximum amount of CCA that could be claimed for tax purposes in 2018? Explain.
c. If Acme decides to depreciate the equipment on a straight-line basis over 15 years, what would the depreciation expense be in 2017?
d. How does the useful life estimated by Acme's management affect the amount of CCA that can be claimed? Explain.
e. Why are the amounts calculated in (a) and (c) likely different? Explain.



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  • CreatedFebruary 26, 2015
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