The Dow Ceramic Company purchased a glass moulding machine in 2006 for $146,000.
ID: 2549019 • Letter: T
Question
The Dow Ceramic Company purchased a glass moulding machine in 2006 for $146,000. The company has been depreciating the machine over an estimated useful lfe of 10 years, assuming no salvage value, by the straight-line method of depreciation. For tax purposes, the machine has been depreciated as a Class 43 property. At the beginning of 2009, Dow overhauled the machine at a cost of $25,000. As a result of the overhaul, Dow estimated that the useful life of the machine would extend five years beyond the original estimate. (a) Calculate the book depreciation for year 201 1. b) Calculate the CCA for year 2011"Explanation / Answer
a. Calculation of Book Depreciation - Straight Line Method
Overhauled cost will be added to remaining cost of machine.
Depreciation for 2006 to 2008 will be 146,000/ 10 years of life.
Depreciation from 2009 will be (102,200 + 25,000)/ 12 years revised life
After overhaulation total life of machine will be extend by 5 years = 10+5 = 15 years. 3 year already gone hence reamining 12 year will be taken for calculation
Book Depreciation for 2011 = $10,600
2. Calculation of Capital Cost Allowance (CCA) for Depreciation
CCA rate for Class 43 = 30% - Eligible machinery and equipment used for manufacturing of goods for sale
Overhauled cost will be added to remaining cost of machine in 2009
Depreciation for 2011 = $ 25,752
Year Particular Amount Beginning Cost Depreciation Remaining Cost 2006 Cost of Purchase 1,46,000 - 14,600 1,31,400 2007 1,31,400 14,600 1,16,800 2008 1,16,800 14,600 1,02,200 2009 Overhauled Cost 25,000 1,02,200 10,600 1,16,600 2010 1,16,600 10,600 1,06,000 2011 1,06,000 10,600 95,400 2012 95,400 10,600 84,800 2013 84,800 10,600 74,200 2014 74,200 10,600 63,600 2015 63,600 10,600 53,000 2016 53,000 10,600 42,400 2017 42,400 10,600 31,800 2018 31,800 10,600 21,200 2019 21,200 10,600 10,600 2020 10,600 10,600 -Related Questions
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