Question

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% for manufacturing and processing and 50% for office space. It is allocated a separate Class 01.

The December 01, 2015 balance in Class 01 reflected a single building that was acquired on December 15, 2013 for $ 1,000,000. Of this total, $ 250,000 was allocated to the land in which the building was situated. This building was sold for $ 900,000 on June 5, 2016. At that time, the value of the land was unchanged at $ 250,000.

Class 08: Acorn Ltd. acquired Class 08 assets for $ 240,000 on February25, 2016. Acorn Ltd. traded in older Class 08 assets and they received a trade in allowance of $ 15,000, resulting in a net cost for the new assets of $ 225,000. The capital cost of the assets traded in was $ 60,000.

Class 10: The balance in Class 10 reflected 10 vehicles that were being used by Acorn Ltd.’s sales staff. Their original cost totaled $ 230,000. Acorn Ltd. decided it would be more economical to provide its sales staff with leased vehicles. Consequently, on April 02, 2016, the 10 vehicles were sold; Acorn Ltd. received $ 140,000 for those 10 vehicles. The amount received for each vehicle was less than its capital cost.

Acorn Ltd. acquired a Mercedes on August 01, 2016, for the use of Acorn Ltd.’s accountant. The Mercedes total cost was $ 145,000, plus 7% PST and 5% GST. The accountant drove the Mercedes 65,000 kilometers during the 2016 fiscal year, with only 10,000 kilometers involving employment duties. The accountant was not a shareholder of Acorn Ltd.

Class 13: Some of Acorn Ltd.’s business was conducted out of a building that was leased by Acorn Ltd. The lease, which had an initial term of 6 years, could be renewed for 2 additional years at the end of the initial term. Immediately after the lease was signed on July 01, 2014, Acorn Ltd. spent $ 216,000 on leasehold improvements. During June, 2016, an additional $ 54,000 was spent upgrading this property.

Acorn Ltd. purchased an unlimited life franchise for $ 130,000 on June 03, 2014. This franchise was sold on December 12, 2015 for $ 140,000.

Acorn Ltd.’s policy was to deduct maximum CCA and maximum CEC amount in each year of operation.

Required:

Calculate the maximum CCA and maximum CEC amount that can be deducted for the year ending November 30, 2016 for Acorn Ltd. Your answer should include the maximum that could be deducted for each CCA class. In addition, indicate the amount of any recapture or terminal loss that resulted from the dispositions during the fiscal year.

Answer 1

1.

Class 01	01/12/2013	Cost of Building	1000000
		Land Value	250000
		Only Building	750000
	01/12/2015	WDV Building	705600
		Difference between Cost and WDV	44400	(Depreciation for 2 Years)
		Monthly Depreciation	1850	(44400/24)
	15/12/2015	Building Cost	800000
		Land Value	150000
		Depreciation	21275	(1850*11.5 months)
	30/10/2016	Written Down Value	928725
Sale Date	05/06/2016	Sale Value	-900000
		Land Value	250000
		Depreciation for Dec'15 to May'16	-11100	(1850*5)
		WDV as on 01/12/2015	705600
		(Profit) or Loss	44500

2.

Class 08	01/12/2015	Opening Balance	330000
	25/02/2016	Acquired	225000
		Old Asset Sale Value	60000
	25/02/2016	Depreciation	2750
		Loss on sale of asset	272750
	30/11/2016	Depreciation	5625
		Written Down Value	219375

3.

Class 10		Original Cost of 10 Vehicles	230000
	01/12/2015	WDV	185000
		Depreciation	45000
		Monthly Depreciation	1875	(45000/24)
	02/04/2016	Sale Value	-140000
		Depreciation	-7500
		WDV as on 01-12-2015	185000
		Loss on sale of Vehicles	37500

4.