Question

Please solve handwritten, no Excel.

A company purchased new casting equipment at a cost of $250,000. The company also paid an extra $70,000 in necessary costs to have the equipment delivered and installed. The casting machine has an estimated service life of 10 years, and it will be depreciated at a CCA rate = 25%.

a] What is the Cost Basis of the casting equipment?

b] What will be the CCA amount each year for the service life of the casting equipment?

Hint: the half-year rule applies by default. Hint: the half-year rule applies by default.

Answer 1

a) Ans-cost basis of casting equipment

=$250, 000+$70, 000

=$320, 000

b) now we calculating CCA amount each year,

By half year rule,

At year 1, CCA= ($320, 000×25%) ×(1/2)

=$40, 000

UCC=$320, 000 - $40, 000

=$280, 000

For 2nd year ,CCA=($280, 000×25%)

=$70, 000

UCC=$280, 000 - $70, 000

=$210, 000

For 3rd year, CCA=($210, 000×25%)

=$52, 500

UCC=$210, 000 - $52, 500

=$157, 500

For 4th year CCA=($157, 500×25%)

=$39, 375

UCC=$157, 500 -$39, 375

=$118, 125

For 5th year ,CCA=($118, 125×25%)

=$29,531.25

UCC=$118, 125 - $29, 531.25

=$88593.75

For 6th year, CCA=($88,593.75×25%)

=$22,148.43

UCC=$88, 593.75 - $22, 148.43

=$66, 445.32

For 7th year, CCA=($66, 445.32×25%)

=$16, 611.33

UCC=$66, 445.32 - $16, 611.33

=$49, 833.99

For 8th year , CCA=($49, 833.99×25%)

=$12, 458.49

UCC=$49, 833.99 - $12, 458.49

=$37, 375.50

FOR 9th year, CCA=($37375.50×25%)

=$9343.875

UCC=$37, 375.50 - $9343.875

=$28, 031.625

For 10th year ,CCA=($28, 031.625×25%)

=$7, 007.90

UCC=$28, 031.625 - $7007.90

=$21,023.73

Finally we get CCA each year for service life of casting .