Cost of the asset$100,000
Life of the asset 5 years
Depreciation rate20%
Capital cost allowance rate 50%
Residual value of the asset nil
Income tax rate 50%
-What differences between accounting income and taxable income can lead to a future income tax liability?
A) revenue and accumulated earnings
B) accumulated depreciation and depreciation
C) CCA and accumulated depreciation
D) CCA and depreciation

Question

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What differences between accounting income and taxable income can lead to a future income tax liability?
A) revenue and accumulated earnings
B) accumulated depreciation and depreciation
C) CCA and accumulated depreciation
D) CCA and depreciation

Quizplus · Accepted Answer

The difference between CCA (Capital Cost Allowance) and depreciation can lead to a future income tax liability because CCA is used for tax purposes and may differ from the depreciation expense recorded in accounting, affecting taxable income.

Cost of the Asset$100,000