Question

A company has a January 1, 2020 balance for CCA class 53 of $1,546,000. During 2020, the company acquired additional Class 53 assets for a total cost of $750,000. Also, one of the several Class 53 assets was sold during the year for proceeds of $75,000. It had a cost of $160,000.

Which of the following answers corresponds to the maximum CCA allowed for the company's Class 53 for the year 2020?

		$1,279,250
		$1,438,000
		$773,000
		None of the choices shown.
		$1,523,000
		$1,448,000
		$1,485,500
		$1,298,000

Answer 1

Capital Cost Allowance on Class 53 Assets has 50% (subject to half year rule) on reducing balance method:

So, On Opening balance of Class 53 Assets, CCA will be charrged 50% after deducting any sale of machinery i.e. $(1,546,000 - 75,000) X 50% = $735,500

And Assets purchased during the year of Class 53, CCA will be charged 25% as per half year rule i.e. $750,000 X 25% = $187,500.

Now, CCA on Class 53 assets for year 2020 is $(735,500 + 187,500) = $923,000.

Balance at the end of the year 2020 will be $(1,546,000 - 75,000 + 750,000 - 923,000) = $1,298,000.00.