In 2016, Maxwell Inc. paid $625,000 for equipment that is expected to have a five-year life. In this industry, the residual value is estimated to be 5 percent of the asset's cost. Maxwell Inc. plans to use straight-line amortization for accounting purposes. For income tax purposes, Maxwell chooses to use the maximum CCA rate of 20 percent and is subject to the half-year rule in 2016. The half-year rule allows only half the normal CCA to be claimed in the year of purchase.

Required

1. Calculate the amortization expense in 2016 and 2017 for accounting and tax purposes.

2. Why does the federal government regulate the amount of amortization a company can deduct when calculating income for income tax purposes?