According to the Canada Revenue Agency (CRA):
I.The purchase cost of a capital asset is to be capitalized and expensed as capital cost allowance over future periods.
II.Any modification costs of a capital asset must be expensed immediately.

Question

Quizplus · Accepted Answer

The first statement is correct, as it aligns with the capital cost allowance (CCA) method used by the CRA for tax purposes. The second statement is incorrect, as modification costs of a capital asset can be capitalized and expensed as part of the CCA over future periods, as long as they meet certain criteria set out by the CRA. Therefore, option C is the best choice as it correctly identifies that the first statement is correct, and the second statement is incorrect.