This year your company bought a piece of equipment for $60,000. the Canada Customs and revenue Agency have classified it as a Cl. 8 asset with an allocated capital cost allowance rate of 20%. The company's tax rate is 30%.
a) What will be your maximum allowable amortization expense for tax purposes for the year of purchase? What will it be in the second year?
b) If your company normally uses straight line depreciation for financial reporting purchases and this asset is to be amortized over 8 years, what amortization expense will appear on the financial statements in year one and year two?
c) Will the taxes paid entry in the income statements for the two years be equal to taxes actually paid to the government? If not briefly discuss why.

Question

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The Answer of This year your company bought a piece of equipment for $60,000. the Canada Customs and revenue Agency have classified it as a Cl. 8 asset with an allocated capital cost allowance rate of 20%. The company's tax rate is 30%.
a) What will be your maximum allowable amortization expense for tax purposes for the year of purchase? What will it be in the second year?
b) If your company normally uses straight line depreciation for financial reporting purchases and this asset is to be amortized over 8 years, what amortization expense will appear on the financial statements in year one and year two?
c) Will the taxes paid entry in the income statements for the two years be equal to taxes actually paid to the government? If not briefly discuss why.

This Year Your Company Bought a Piece of Equipment for $60,000