Could someone teach me how to caluclate the Base UCC amount for CCA? This is all

Question

Could someone teach me how to caluclate the Base UCC amount for CCA? This is all the information we are given. Thank you!

7.2 From the information in bold characters, complete the table below Tax Savings Due to CCA Adjustments to UCC from Base UCC CCA Remaining UCC Year Purchases &Amount; for Dispositions CCA where CCA stands for Acapital cost allowance@ UCC stands for Aundepreciated capital cost Assume that d-20% (Declining Balance),-50% and the half-year rule applies. 1998 1999 2000 S500,000 300,000 (100,000)

Explanation / Answer

To answer this questen, we have to first understand what is UCC and CCA.

Undepreciated capital cost (UCC) of a class refers to the balance of the class at any time. Generally, UCC is equal to the total capital cost of all properties of a class minus any capital cost allowance (CCA) claimed in the previous years. Capital Cost Allowance (CCA) is the means by which Canadian businesses may claim depreciation expense for calculating taxable income under the Income Tax Act (Canada).

CCA Calculation for Assets Subject to the Half-Year Rule:

CCA = UCC × t × d

Where

CCA = Capita cost allowance for the current fiscal period

UCC = undepreciated capital cost before claiming CCA in the current fiscal period

t = the proportion of days in the current fiscal period vs a normal fiscal period

d = the specified CCA rate with respect to the class

$ 400,000

Working Note for Values in Table:

Column 2: This is where you fill in your running balance for each CCA class from last year i.e column 7. We will assume that year 1998 is the first year of claiming capital cost allowance therefore the base undepreciated capital cost at the start of the year will equals to the Adjustment to UCC from Purchase and Disposition for year 1998 (i.e. $500,000).

Column 4: Column 2 plus column 3 will give you the entries for this column.

Column 6: multiplying the base amount for CCA (column 4) by the CCA rate for that class (column 5).

Column 7: Enter the result of subtracting Column 6 (your chosen CCA claim amount for the year) from Column 4 (your UCC after additions and dispositions) to determine how much undepreciated capital cost is left in each class. When you calculate your CCA the next tax year, this is the number that will go into column 2.

Year UCC at The Start of Year Adjustment to UCC from Purchase and Disposition Base UCC Amount for CCA Rate CCA Remaining UCC Tax Savings due to CCA 1998 0 $ 500,000 $ 500,000 20% $ 100,000 $ 400,000 Tax rate not given 1999

$ 400,000

0 $ 400,000 20% $ 80,000 $ 320,000 2000 $ 320,000 $ 300,000 $ 620,000 20% $ 124,000 $ 496,000 2001 $ 496,000 $ (100,000) $ 396, 000 20% $ 79,200 $ 316,800

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.