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 tax liability results from the difference between depreciation and capital cost allowance?
A) sales taxes payable
B) income tax expense
C) future income taxes payable
D) current taxes payable

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 tax liability results from the difference between depreciation and capital cost allowance?
A) sales taxes payable
B) income tax expense
C) future income taxes payable
D) current taxes payable

Quizplus · Accepted Answer

The difference between depreciation and capital cost allowance creates a temporary difference, leading to future income taxes payable.

Cost of the Asset$100,000