Question

please explain the answers

The following information relates to Davion Dennis Ltd. for its taxation year that ends on December 31, 2020:

1. The Company has UCC balances on January 1, 2020 for its tangible assets as follows:

Class 1 (A single building acquired in 2012) $478,695

Class 8 243,000

2. During 2020, the building that was acquired in 2012 was sold for cash of $650,000. Of this total, $125,000 represented the value of the land on which the building was situated. The building had a capital cost of $625,000, of which $80,000 represented the value of the land at time the building was acquired.

The building was replaced during 2020 with a new building at a cost of $745,000, of which $125,000 represented the value of the land.

The old building was used 100 percent for office space and was allocated to a separate Class 1. The new replacement building is also used 100 percent for office space and is allocated to a separate Class 1.

3. During 2020, the Company purchased office furnishings for $74,000. They traded in older furnishings and received an allowance of $22,500. The capital cost of the furnishings that were traded in was $56,000.

4. During the year, Davion Dennis Ltd. purchased a Lexus to be used by the president of the Company. The cost of this car was $93,000. The president drives it 23,000 kilometers during the year, of which 5,750 kilometers are for employment related purposes.

5. The company conducts some of its business out of a building that it leases. The lease was signed on February 1, 2020 and had an initial term of 3 years. It has an option to renew for 1 year. At the time the lease was signed, Davion Dennis Ltd. spent $150,000 on leasehold improvements.

6. Davion Dennis Ltd. has always deducted the maximum CCA in each year of operation.

Required: Calculate the maximum CCA that can be deducted for each class for 2020. In addition, indicate the amount of any recapture or terminal loss that results from dispositions during 2020.

Answer 1

1.The Undepreciated Capital Cost (UCC) on 1st jan for tangible asstes were as follows

Class 1 (building) = 478695

Class 8 (furniture,photocopier,tools) = 243000

3.The company purchased new furniture by paying 74000

The allowance received for the old furniture was 22500

That means the cost of the new furniture was 96500

and the capital cost of the old furniture was 56000 back when it was purchased

4. During the year the company purchased a car for the president at 93000

The President drove it for 23000 kms

Out of which 5750km were driven for the employment purpose

and the remaining 17250 kms were driven for personal purposes