On January 1, 2020, Seal Corp. purchased a machine costing $250,000. The machine is in an asset class for tax purposes with a 30% CCA rate. It has an estimated $40,000 residual value at the end of its five-year useful life. The CCA deduction for tax purposes for the year 2020 is
A) $25,000.
B) $31,500
C) $37,500.
D) $75,000.

Question

Quizplus · Accepted Answer

The CCA deduction is calculated as 30% of the undepreciated capital cost (UCC). For the first year, the half-year rule applies, so the CCA is 30% of half the cost: 0.30 * ($250,000 / 2) = $37,500.