Question

On January 1, 2018, ABC Ltd. signed a five-year lease for retail space for a store....

On January 1, 2018, ABC Ltd. signed a five-year lease for retail space for a store. The lease expires on December 31, 2022, and has two successive renewal options for three years each, In 2020, ABC Ltd. made $60,000 of leasehold improvements to this space. Assuming that ABC Ltd. has a December 31 year end, what is the maximum capital cost allowance claim that ABC Ltd. can make in 2020 in respect of these improvements? Select one: A. $11,250 B. $15,000 C. $18,000 D. $7,500

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Capital cost allowance for leasehold improvements falls under CCA Class 13. Under CCA Class 13, leasehold improvement costs are amortized on a straight line basis for a minimum period of 5 years and the maximum period of 40 years. The Capital cost allowance for leasehold improvements is amortized over a period which should not exceed the period of original lease plus one successive renewal.

ABC Ltd. has the inititial leas period of 5 years and it has two successive renewal options for three years each. But for amortization purpose only one successive renewal can be considered. Hence, the total period over which the leasehold improvement costs should be amortized is 5 years plus 3 years = 8 years.

Therefore, the maximum capital cost allowance that ABC Ltd. can claim in 2020  on a straight line basis is =

60000 divided by 8 = $750

Hence the right answer is D. $7500

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1 of year 1, Falk Company signed a contract to lease space in a...
On January 1 of year 1, Falk Company signed a contract to lease space in a building for 3 years. The lease contract calls for annual (prepaid) rental payments of $100,000 on each January 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. Present value of the three lease payments is $270,000. Assume the lease is accounted for as an operating lease. Prepare entries for Falk to...
On January 1, 2018, Winn Heat Transfer leased office space under a three year operating lease...
On January 1, 2018, Winn Heat Transfer leased office space under a three year operating lease agreement. The arrangement specified three annual rent payments of $60,000 each, beginning December 31, 2018, and at each December 31 through 2020. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 5%. Winn also paid a $276,000 advance payment at the beginning of the lease in addition to the first $60,000 rent payment. With permission of the owner, Winn...
On July 1, 2004, Harper Company signed a contract to lease space in a building for...
On July 1, 2004, Harper Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid) rental payments of $80,000 on each July 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2009, Harper decides to sublease the space to Bosio & Associates for the remaining 10 years of the lease—Bosio pays $260,000 to Harper...
On January 1, 2018, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of...
On January 1, 2018, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Ogleby to make annual payments of $180,000 at the beginning of each year for five years with title passing to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Ogleby uses the straight-line method of depreciation for all of its fixed assets. Ogleby accordingly accounts for this lease...
please explain the answers The following information relates to Davion Dennis Ltd. for its taxation year...
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...
PREPARE ADJUSTING ENTRIES... A.) On March 1, 2018, Accounting Creations rented a portion of one store...
PREPARE ADJUSTING ENTRIES... A.) On March 1, 2018, Accounting Creations rented a portion of one store to Marketing Majors Inc. The contract was for 15 months and Accounting Creations required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company. B.) Accounting Creations started to lease some new retail space in 2018 and added shelving and fixtures to this leased space. Based...
1) Discount Co signed a 12​-year note payable on January​ 1, 2018​, of $ 780000. The...
1) Discount Co signed a 12​-year note payable on January​ 1, 2018​, of $ 780000. The note requires annual principal payments each December 31 of $ 65000 plus interest at 8​%. The entry to record the annual payment on December​ 31, 2020​, includes A. a debit to Interest Expense for $52,000. B. a debit to Interest Expense for $62,400. C. a credit to Cash of $127,400. D.a credit to Notes Payable for $65,000. 2) Eva Company purchased a building with...
On January 1, 2017, the Millwork Company signed a four-year non-cancelable lease of equipment from the...
On January 1, 2017, the Millwork Company signed a four-year non-cancelable lease of equipment from the Midford Company. The annual lease payments of $35,000 are to be paid on January 1 of each year. The first payment is due on January 1, 2017. The lease contains a bargain purchase option price of $15,000. The equipment's fair value is expected to be $30,000 on December 31, 2020. The estimated economic life of the equipment is six years, and the estimated residual...
On January 1, 2018, Taco King leased retail space from Fogelman Properties. The 10-year finance lease...
On January 1, 2018, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 3% of Taco King’s sales revenue, with a quarterly sales minimum of $440,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous 5-year period, Taco King has generated quarterly sales of over $670,000. Fogelman’s interest rate, known by Taco King, was 4%. (FV of $1, PV of $1, FVA of...
Acorn Ltd. has a November 30-year end. As of December 01, 2015, Acorn Ltd. had the...
Acorn Ltd. has a November 30-year end. As of December 01, 2015, Acorn Ltd. had the following UCC balances for its various tangible assets:                                               Class 01             $705,600                                               Class 08             330,000                                               Class 10             185,000                                               Class 13             175,500 Class 01: A new building was purchased on December 15, 2015 at a cost of $ 950,000, with $ 150,000 of this total being allocated to the land on which the building was situated. The new building was used 50%...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT