Each of the five sales representatives at CapiCal Enterprises were provided with automobiles valued at $25,000 each. The purchase was made 26 months ago, two months before the end of the fiscal year. The cars have an expected lifetime of seven years each. What is the maximum CCA [capital cost allowance] the Company can claim on its annual tax return at the end of 26 months?

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Quizplus · Accepted Answer

The maximum CCA for the first year (which is only 2 months in this case due to the purchase timing) is calculated based on a half-year rule, assuming the tax system applies this rule. The full annual depreciation rate for automobiles (assuming a common rate of 30% for this type of asset under declining balance method) is applied to half the year's value due to the half-year rule. For subsequent years, the full rate is applied to the remaining balance.1. Total value of automobiles = 5 * $25,000 = $125,0002. First year (2 months, but half-year rule applies): $125,000 * 30% * 0.5 = $18,7503. Remaining value after first year: $125,000 - $18,750 = $106,2504. Second year full CCA: $106,250 * 30% = $31,8755. Total CCA for 26 months: $18,750 (first year) + $31,875 (second year) = $50,625However, the question asks for the maximum CCA claimable at the end of 26 months, which would include the first year's reduced claim due to the half-year rule and the second year's full claim. The calculation provided doesn't directly match any of the options given, indicating a need for clarification or a mistake in the calculation process. Given the options, the closest to a reasonable interpretation based on typical CCA rules and the information provided would be to consider the maximum allowable in a way that fits the options, suggesting a possible misinterpretation of the calculation steps or rates provided. Given the discrepancy, the correct answer based on standard CCA calculation methods and the options provided seems to be a misunderstanding in the calculation process. The correct approach involves calculating the CCA for each year based on the declining balance method, but without specific rates or a clear indication of the half-year rule's application in the second year, the provided options do not directly match the expected outcome of standard calculations. Therefore, without the exact CCA rate or further details on the tax rules applicable, the provided answer choices do not align with the standard calculation method described. The correct answer should reflect the total CCA claimable after 26 months, considering the half-year rule for the first year and full depreciation for the second year, but the calculation mistake or misunderstanding in the explanation process leads to confusion. Revisiting the calculation with a focus on the options provided and standard CCA rules might suggest looking for an error in the calculation steps or assumptions made about the depreciation method and rates applicable.

Each of the Five Sales Representatives at CapiCal Enterprises Were