A $40,000 asset was purchased and classified as a Class 10 asset for CCA purposes. If the CCA rate is 30%, calculate UCC for the end of year 3.

Question

Quizplus · Accepted Answer

The UCC at the end of year 3 is calculated using the CCA rate of 30%. For year 1, the CCA is 30% of $40,000, which is $12,000, leaving a UCC of $28,000. For year 2, the CCA is 30% of $28,000, which is $8,400, leaving a UCC of $19,600. For year 3, the CCA is 30% of $19,600, which is $5,880, leaving a UCC of $13,720. However, the correct calculation should account for the half-year rule in the first year, which means only half of the CCA rate applies. Thus, the first year's CCA is $6,000 (half of $12,000), leaving a UCC of $34,000 at the end of the first year. Then, for year 2, 30% of $34,000 is $10,200, leaving a UCC of $23,800. For year 3, 30% of $23,800 is $7,140, leaving a UCC of $16,660 at the end of year 3.

A $40,000 Asset Was Purchased and Classified as a Class