Kane Company is in the process of purchasing a new machine for its production line.It is near the end of the year,and the machine is being offered at a special discount if purchased before the end of the year.Kane has determined that the capital cost allowance (CCA)deduction on the new machine for the year of purchase would be $13,000.The tax rate is 30%.If Kane purchases the machine and reports a positive net income for the year,what would be the tax savings from the CCA tax shield related to this machine for the year of purchase?

Question

Quizplus · Accepted Answer

The tax savings from the CCA tax shield can be calculated as CCA deduction x tax rate. So, tax savings = $13,000 x 30% = $3,900. Therefore, the best choice is B.

Kane Company Is in the Process of Purchasing a New