Question

1. You have just purchased a Time machine for 10,000,000. It is in the 30% CCA category and will last for 8 years. The asset class will be closed at the end of the project. What is the undepreciated capital cost at the end of the 3rd year? (Create a CCA table and remember the half year rule)

Answer 1

CCA table can be created as below:

here, Beg UCC is Undepreciated capital cost at the beginning of year = End UCC - CCA

CCA for the first year is calculated using half year rule, i.e. the cost is depreciation only 50% of the CCA rate in 1st year

So, in the first year, CCA = 15% of beg UCC.

in all other years, CCA = 30% of beg UCC

End UCC is undepreciated capital cost at the end of year = Beg UCC - CCA

So,  undepreciated capital cost at the end of the 3rd year is $4165000

Year	Beg UCC	CCA	End UCC
1	$             1,00,00,000	$       15,00,000	$           85,00,000
2	$                 85,00,000	$       25,50,000	$           59,50,000
3	$                 59,50,000	$       17,85,000	$           41,65,000
4	$                 41,65,000	$       12,49,500	$           29,15,500
5	$                 29,15,500	$          8,74,650	$           20,40,850
6	$                 20,40,850	$          6,12,255	$           14,28,595
7	$                 14,28,595	$          4,28,579	$           10,00,017
8	$                 10,00,017	$          3,00,005	$              7,00,012