You just purchased some equipment that belongs in a 25% CCA class. The equipment cost $67,601. What will the book value of this equipment be at the end of three years should you decide to resell the equipment at that point in time?

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Quizplus · Accepted Answer

The book value of the equipment after three years can be calculated using the Capital Cost Allowance (CCA) method at a rate of 25%. The CCA for the first year is 25% of the half-year rule applied amount, which is 25% of ($67,601 / 2) = $8,450.13. The remaining value is $67,601 - $8,450.13 = $59,150.87. For the second year, the CCA is 25% of $59,150.87 = $14,787.72, leaving a balance of $59,150.87 - $14,787.72 = $44,363.15. For the third year, the CCA is 25% of $44,363.15 = $11,090.79, leaving a final book value of $44,363.15 - $11,090.79 = $33,272.36 (rounded to $33,271.88 due to possible slight differences in rounding at each step).

You Just Purchased Some Equipment That Belongs in a 25