Q Inc. sold its warehouse for $1,000,000 (land $500,000; building $500,000) in t
ID: 2413551 • Letter: Q
Question
Q Inc. sold its warehouse for $1,000,000 (land $500,000; building $500,000) in the current year and purchased a larger warehouse for $3,000,000 (land $1,000,000; building $2,000,000). The original warehouse cost $600,000 (land $200,000; building $400,000) and was the only asset in Class 1 which had an undepreciated capital cost balance of $380,000 before the sale. Q Inc. elected to put the new warehouse into a separate Class 1 to take advantage of the 6% CCA rate. What is the minimum amount is to be reported in net income for tax purposes for the current year?
Explanation / Answer
Solution:-
Particulars
Land
Building
Total
Class 1
Sale of old Warehouse (1)
500000
500000
1000000
Cost of old Warehouse (2)
200000
400000
600000
Written down value of old Warehouse (given)- (3)
-
-
380000
Gain on Sale of warehouse (1-3)- (4)
620000
Class 2
Purchase of Warehouse
1000000
2000000
3000000
Depreciation @ 6% (5)
180000
Written down value of new Warehouse at end of year
2820000
Net Income (4-5)
440000
Therefore, Minimum amount to be reported as Net Income for tax purposes for current year is $ 4,40,000
Particulars
Land
Building
Total
Class 1
Sale of old Warehouse (1)
500000
500000
1000000
Cost of old Warehouse (2)
200000
400000
600000
Written down value of old Warehouse (given)- (3)
-
-
380000
Gain on Sale of warehouse (1-3)- (4)
620000
Class 2
Purchase of Warehouse
1000000
2000000
3000000
Depreciation @ 6% (5)
180000
Written down value of new Warehouse at end of year
2820000
Net Income (4-5)
440000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.