Question

You are provided with the following information related to class 8 assets for the current​ year:

Undepreciated Capital Cost​ (UCC) Beginning​ Balance: $82,000

Cost of​ additions: ​$2,000

Dispositions​ (i.e. reduction for​ disposals): $15,000

The class 8 rate is​ 20%. Using only this​ information, what is the maximum capital cost allowance​ (CCA) deduction for the current year for class​ 8?

Answer 1

Answer: as per given information if it is assumed that asset are disposed at the end of the year then whole disposalable asset will be eligible for depreciation because whole asset considered to be used in a year.

also it is assumed that additions are made at the beggining of the year so that whole asset will become eligible for depreciation for the complete year.

so both parts (addition + disposal) become eligible for depreciation and we will get the maximum depreciation amount on asset.

total asset book value of asset: opening value of asset + additions + disposals.

                                                 $82000 + $2000 + = $84000

maxmimum depreciation on asset for the year = book vlaue of asset * depreciation rate

                                                                             $84000 * 20% = $16800.

note if question ask for the minimum depreciation on asset then we can assume that disposal are made at the beginning of the year and addtions are made at the end of the year.

book value of asset becomes = $book value at beginning - disposal

                                                = $82000 - $15000 = $67000.

additions has not been added because purchased at the end of the year so eligible for depreciation.

minimum depreciation = book value of asset * rate

                                    $67000 * 20% = $13400