In 2019, Maxwell Inc. paid \(\$ 625,000\) for equipment that is expected to have a five-year life. In this industry, the residual value is estimated to be 5 percent of the asset's cost. Maxwell Inc. plans to use straight-line amortization for accounting purposes. For income tax purposes, Maxwell chooses to use the maximum CCA rate of 20 percent. The office equipment is in class 8 and considered eligible for the accelerated investment incentive.

Required

1. Calculate the amortization expense in 2019 and 2020 for accounting and tax purposes.

2. Why does the federal government regulate the amount of amortization a company can deduct when calculating income for income tax purposes?