Beaver Company had taxable cash sales of $400,000 in Year 1. Tax-deductible cash expenses in Year 1 were $140,000, and capital cost allowance (CCA) deductions were $60,000. The income tax rate was 40%.
- What were the tax savings from the CCA tax shield for Year 1?

Question

Quizplus · Accepted Answer

The tax savings from the CCA tax shield is calculated by multiplying the CCA deduction by the tax rate. Thus, $60,000 (CCA deduction) * 40% (tax rate) = $24,000.

Beaver Company Had Taxable Cash Sales of $400,000 in Year