SOLVED

21) 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? A) $37,500 B) $26,250 C) $22,313 D) $18,375 E) $17,857 22) Trekker Trash & Recycling Ltd. bought a prefabricated building at a cost of $150,000 to house partially processed materials. The building was erected at the end of March, and it’s expected lifetime is 15 years. Buildings have a 4% CCA rate. What is the maximum amount of CCA can Trekker Trash claim for the fiscal year at its end in December? A) $4,500 B) $3,000 C) $10,000 D) $7,500 E) $6,000 23) A Terminal Loss occurs when the selling price of a company’s asset is A) Equal to the undepreciated capital cost (UCC) B) Higher than the undepreciated capital cost (UCC) C) Less than the undepreciated capital costs (UCC) D) Higher than the book value of the asset E) Less than book value, but higher than the undepreciated capital costs (UCC) 24) A factory was gutted by fire and none of its machinery was salvaged. The machinery was underinsured. The closing balance of the undepreciated capital cost (UCC) account to which the machinery had belonged was $9,750,000 of which $1,113,500 represented the lost assets. The CCA rate on this asset class is 30%. On the year’s income tax return, the company A) Can claim $3,704,450 to realize the full CCA on the lost assets B) Can claim $2,590,950 C) Cannot use any portion of the $1,113,500 nor can it use it in the future as the assets no longer exist D) Can claim $2,925,000 E) Cannot use any portion of the $1,113,500 until replacement assets have been purchased 25) When an asset, which had been in use for several years, is sold at a price that exceeds the balance in the UCC account but is less than book value A) The excess amount is called CCA B) The excess amount is called is a capital gain C) The excess amount is called recaptured CCA D) The excess amount reduce taxable income E) The excess amount is not considered income 26) JKJ Manufacturing Inc.’s Income Statement for the year reported Sales Revenue of $44,350,000. Cost of Goods Sold was 35% of Sales Revenue. Sales, Administration and Distribution expenses were $19,750,000. Interest charges amounted to $1,200,000. There were no differences between accounting income and taxable income. If the federal tax rate is 20.5% and the provincial rate is 16%, what is JKJ Manufacturing Inc.’s taxes payable? A) $2,875,287.50 B) $6,027,975 C) $1,614,887.50 D) $1,260,400 E) $3,313,287.50 27) Adjustments must be made from accrual-based accounting records to be consistent with the Canadian Income Tax Act. One such adjustment is A) The unfunded portion of pension expenses must be estimated to be tax-deductible B) Cash payouts in support of warranties must be estimated to be tax deductible C) Dividends received from Canadian corporations must be added into taxable income D) Amortization expense that is declared must conform to CCA rate maximums E) Income earned is declared according to the calendar year, not incorporate fiscal year 28) A company’s financial statements two years ago showed a net income after taxes of $1,235,000 and a year ago, $877,500. This year the company reported a loss of $1,550,000. If the Company’s tax rate has remained unchanged at 35% for these years, what refund will it be eligible to receive? A) No refund. Losses are carried forward. B) $542,500 C) $775,250 D) $196,875 E) $1,550,000 29) If losses are to be carried forward the amount is A) Multiplied by the expected future tax rate and is entered as a liability B) Entered in its entirety as a deferred tax liability C) Entered in its entirety as a prepaid tax under current assets D) Entered in its entirety as an extraordinary gain E) Multiplied by the expected future tax rate and entered as an asset 30) The federal plus provincial income tax brackets [rounded to thousands and inclusive] are as follows: Up to $20,000 is 15%, $21000-$50000 is 25%, $51,000 to $90,000 is 32%, $91,000 up to $130,000 is 36%, and over $130,000 is 41%. Kenneth Sloan’s annual income is $110,000 after deductions, what is his tax payable? A) $28,400 B) $30,500 C) $35,200 D) $37,700 E) $39,600