For Years 1 through 6 Better Products Ltd. had annual net income of $20,000, CCA of $40,000 each year, a 40 percent tax rate, a discount rate of 10 percent and annual cash sales of $200,000. The depreciable assets of Better Products belong in several different classes under the Income tax Act, have a salvage value of zero at the end of six years, and were all bought new at the beginning of Year 1. The present value factors, in simplified form, for 10 percent are:

-What is the tax saving from CCA in each year?

Question

For Years 1 through 6 Better Products Ltd. had annual net income of $20,000, CCA of $40,000 each year, a 40 percent tax rate, a discount rate of 10 percent and annual cash sales of $200,000. The depreciable assets of Better Products belong in several different classes under the Income tax Act, have a salvage value of zero at the end of six years, and were all bought new at the beginning of Year 1. The present value factors, in simplified form, for 10 percent are:
 
-What is the tax saving from CCA in each year?

Quizplus · Accepted Answer

The tax saving from CCA in each year can be calculated using the following formula: 
Tax saving = CCA x Tax rate
Given, CCA = $40,000 and Tax rate = 40% = 0.4
Therefore, Tax saving = $40,000 x 0.4 = $16,000
This is the same for each year, as the CCA amount and tax rate remain constant. Therefore, the answer is A) $16,000.

There is no additional best choice(s) question mentioned in the prompt.

For Years 1 Through 6 Better Products Ltd