Question 1

a) In the current year H Ltd., an HST registrant, disposed of a passenger vehicle (cost $38,000; UCC $22,000) for $16,000. At the same time H purchased a new passenger vehicle for $46,000 plus HST. What is the maximum CCA deduction that H can claim in the current year? Note: Assume the new passenger vehicle is not designated immediate expensing property. Do not place a minus sign in front of the amount.

b) P incurred incorporation costs of $12,000 to incorporate a new corporation, effective January 1 of the current year, and chose December 31 as its first year end. What is the maximum amount that can be deducted in computing income for the current year? Note: Do not place a minus sign in front of the amount.

Additional notes:

For Question 1a), the textbook states any vehicle greater than the prescribed amount of $36,000 plus tax, should be subject to $36,000 plus tax. But since it is a HST registrant, they do not add HST to the cost as the tax is fully recoverable.

For Question 1b, the textbooks says incorporation costs in excess of $3,000 is subject to a capital cost allowance (CCA) rate of 5%.

I tried two calculations for the second question and all answers were wrong.

I tried 3,000 + (12,000 * 5%) = 3,600

I tried 12,000 - 3,000 = 9,000

3,000 + (9,000 * 5%) = 3450