Question

Martinez Corporation purchased a truck at the beginning of 2020 for $36,000. The truck is estimated...

Martinez Corporation purchased a truck at the beginning of 2020 for $36,000. The truck is estimated to have a residual value of $3,000 and a useful life of 275,000 km. It was driven for 71,000 km in 2020 and 84,000 km in 2021.
Calculate depreciation expense for 2020 and 2021 using the units of production method. (Round per km to 4 decimal places, e.g. 15.1254 and round final answers to 0 decimal places, e.g. 5,275.)
2020 2021

Depreciation expense

 $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places

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For tax purposes, the asset’s capital cost allowance (CCA) rate is 30%. Calculate the CCA for 2020 and 2021.
2020 2021

Capital Cost Allowance (CCA)

 $enter a dollar amount $enter a dollar amount
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Answer #1

1) Depreciation expense for 2020 and 2021 using the units of production method is calculated as follows:

  Depreciation expense p.a = (Cost of Assets - Salvage Value) / Useful Life

  = ($36,000 - $3,000 ) / 275,000 km.

= $33,000 /275,000 km.

= 0.12 per km.

Depreciation expense for 2020 =   71,000 km * 0.12 per km. = $8,520

Depreciation expense for 2021 =  84,000 km * 0.12 per km. = $10,080

2) The asset’s capital cost allowance (CCA) for 2020 and 2021 is calculated as follows:

The asset’s capital cost allowance (CCA) rate is 30%

a)The asset’s capital cost allowance (CCA) for 2020 = $36,000 * 15%   = $5,400

The asset’s capital cost allowance (CCA) for 2020 is 5,400

b)The asset’s capital cost allowance (CCA) for 2021 =( $36,000 - $8,520 - $5,400) * 30%    = $6,624

The asset’s capital cost allowance (CCA) for 2021 is 6,624

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