On January 1, 2017, Seal Corp.purchased a machine costing $250,000.The machine is in an asset class for tax purposes with a 30% CCA rate.It has an estimated $40,000 residual value at the end of its five year useful life.The CCA deduction for tax purposes for the year 2017 is
A)$25,000.
B)$31,500
C)$37,500.
D)$75,000.

Question

Quizplus · Accepted Answer

The CCA deduction is calculated using the declining balance method. For the first year, only half of the CCA rate is applied. Therefore, the CCA deduction for 2017 is 0.5 * 30% * $250,000 = $37,500.