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on October 12, 2015, the company acquires 20 small cars to be used as delivery vehicles. The cost of these cars is $12,000 each and, for purposes of calculating CCA, they are classified as Class 10 assets. During the first year of operations, the company establishes a fiscal year ending on December 31. In the fiscal periods 2016 through 2020, the following transactions take place with respect to the company's fleet of delivery cars: 2016 The company acquires five more cars at a cost of $12,500 each. In addition, three of the older cars are sold for total proceeds of $27,500. 2017 There are no new acquisitions of cars during this year. However, four of the older cars are sold for total proceeds of $38,000. 2018 In December 2018, 13 of the original cars and 3 of the newer cars are sold for $128,000. It was the intent of the company to replace these cars. However, because of a delay in delivery by the car dealer, the replacement did not occur until January 2019. 2019 In January 2019, the company takes possession of 25 new delivery cars at a cost of $16,000 each. No cars are disposed of during 2019. 2020 In March 2020, there is a change in management at Golden Dragon Ltd. They conclude that the company's take out operation is not in keeping with the more elegant image that the sit down restaurant is trying to maintain. As a consequence, the take out operation is closed, and the 27 remaining delivery cars are sold. Because of the large number of cars being sold, the total proceeds are only $185,000. Golden Dragon Ltd. takes maximum CCA in each of the years under consideration. Required: For each of the fiscal years 2015 through 2020, calculate CCA, recapture, or ter- minal loss for Golden Dragon's fleet of cars. In addition, indicate the January 1 UCC for each of the years 2016 through 2021. NOTE Prior to 2019, the half-year rule was in effect. For 2019 and 2020, the Accll provisions are available. Assignment Problem Five - 4 (CCA Calculations) The fiscal year of the Bostik Manufacturing Company, a Canadian controlled private company, ends on December 31. On January 1, 2020, the UCC balances for the various classes of assets owned by the company are as follows: Class 1 - Building (Note 1) $342,000 Class 8 - Office Furniture 66,000 Class 10 - Vehicles 225,000 Class 10.1 - President's Car 16,500 Class 13 - Leasehold Improvements 26,125 Class 14.1 Nil Class 50 - Computer Hardware 48,000 Class 53 - Manufacturing Equipment 126,000 Note 1 The Class 1 building was acquired new in 2018 for $400,000. It is used 100 percent for manufacturing and processing. Note 2 The acquired vehicle was a specialized delivery truck. A damaged delivery truck with an original cost of $53,000 was traded in on the purchase. The trade-in allowance was $15,000 Note 3 None of the tools that were acquired during the year cost more than $500. During this same period, the following dispositions also occurred: Class 8 - Old, well used, and mismatched office furniture was donated to a local non- profit organization. The original cost of these assets totaled $35,000. The fair market value of these assets was negligible. Class 10.1 - Once the president of Bostik saw how high the taxable benefit on his BMW 650 was, he ordered it sold. It had cost $120,000 in 2019. Because it had high mileage and was an unpopular colour, Bostik could only get $50,000 for it. Class 53 - Since the manufacturing equipment was technologically old and the new equipment would be leased, all of the manufacturing equipment was sold for total proceeds of $27.000. Its original cost was $450,000. Other Information: 1. The company leases one floor of a building for $36,000 per year. It houses the headquar- ters of Bostik, including the office of the president. The lease was negotiated on January 1, 2017, and has an original term of five years. There are two renewal options on the lease. The term for each of these options is three years. The company made $38,000 of lease- hold improvements immediately after signing the lease. No further improvements were made until the current year. 2. On September 24, 2020, one of the company's trucks fell into a sinkhole and disappeared. (The driver was making a delivery at the time and captured the slow fall on his cell phone.) At the time of the accident, the fair market value of the truck was $32,300. The proceeds from the company's insurance policy amounted to $30,000. The original cost of the truck was $45,000. 3. In early 2020, one of Bostik's employees developed a unique manufacturing process that the company intends to market to other manufacturers. Bostik wanted to charge $50,000 for a licence with a 10 year life. However, they eventually accepted a payment of $100,000 for a licence that has an unlimited life. No internal costs were allocated to this process. 4. It is the policy of the company to deduct maximum CCA in all years. Required: Calculate the maximum 2020 CCA that can be taken on each class of assets, the January 1, 2021, UCC balance for each class, and any other 2020 income inclusions or deduc- tions resulting from the information provided in the problem. Assignment Problem Five - 5 (CCA Calculations Over 3 Years) Barry's Books is an unincorporated business that began operations on July 1, 2018. The owner/ operator is Barry Levin and his business is selling historically important books (e.g., first edi- tions). All of his sales are in Ontario At the inception of his business he acquired a number of assets as follows: Furniture and fixtures with a cost of $170,000. duck at a cost of $43,000 1 2 4 9 Capital Cost Allowance (CCA) 6 7 Revised UCC Recapture 10 3 Beginning UCC 5 Disposals 8 Terminal Loss 12 CCA Class number Description Additions Accll 1-a 1-b 13 Ending UCC $624,000.00 $106,250.00 $74,160.00 Adjusted UCC $650,000.00 $187,500.00 $92,700.00 11 CCA Rate 4% 10% 20% 30% 30% $650,000.00 Nil $95,000.00 $17,850.00 New Building 62500 $650,000.00 $125,000.00 $92,700.00 0 30,000 125000 1200 -3500 60,000 $26,000.00 $18,750.00 $18,540.00 2,677.5 13,500 President's Car President's Car 30,000 15,000 45,000 16,500 8 10.1 10.1 14 14.1 44 Goodwill 5% Nil $68,000.00 Nil $65,000.00 Nil 53 on October 12, 2015, the company acquires 20 small cars to be used as delivery vehicles. The cost of these cars is $12,000 each and, for purposes of calculating CCA, they are classified as Class 10 assets. During the first year of operations, the company establishes a fiscal year ending on December 31. In the fiscal periods 2016 through 2020, the following transactions take place with respect to the company's fleet of delivery cars: 2016 The company acquires five more cars at a cost of $12,500 each. In addition, three of the older cars are sold for total proceeds of $27,500. 2017 There are no new acquisitions of cars during this year. However, four of the older cars are sold for total proceeds of $38,000. 2018 In December 2018, 13 of the original cars and 3 of the newer cars are sold for $128,000. It was the intent of the company to replace these cars. However, because of a delay in delivery by the car dealer, the replacement did not occur until January 2019. 2019 In January 2019, the company takes possession of 25 new delivery cars at a cost of $16,000 each. No cars are disposed of during 2019. 2020 In March 2020, there is a change in management at Golden Dragon Ltd. They conclude that the company's take out operation is not in keeping with the more elegant image that the sit down restaurant is trying to maintain. As a consequence, the take out operation is closed, and the 27 remaining delivery cars are sold. Because of the large number of cars being sold, the total proceeds are only $185,000. Golden Dragon Ltd. takes maximum CCA in each of the years under consideration. Required: For each of the fiscal years 2015 through 2020, calculate CCA, recapture, or ter- minal loss for Golden Dragon's fleet of cars. In addition, indicate the January 1 UCC for each of the years 2016 through 2021. NOTE Prior to 2019, the half-year rule was in effect. For 2019 and 2020, the Accll provisions are available. Assignment Problem Five - 4 (CCA Calculations) The fiscal year of the Bostik Manufacturing Company, a Canadian controlled private company, ends on December 31. On January 1, 2020, the UCC balances for the various classes of assets owned by the company are as follows: Class 1 - Building (Note 1) $342,000 Class 8 - Office Furniture 66,000 Class 10 - Vehicles 225,000 Class 10.1 - President's Car 16,500 Class 13 - Leasehold Improvements 26,125 Class 14.1 Nil Class 50 - Computer Hardware 48,000 Class 53 - Manufacturing Equipment 126,000 Note 1 The Class 1 building was acquired new in 2018 for $400,000. It is used 100 percent for manufacturing and processing. Note 2 The acquired vehicle was a specialized delivery truck. A damaged delivery truck with an original cost of $53,000 was traded in on the purchase. The trade-in allowance was $15,000 Note 3 None of the tools that were acquired during the year cost more than $500. During this same period, the following dispositions also occurred: Class 8 - Old, well used, and mismatched office furniture was donated to a local non- profit organization. The original cost of these assets totaled $35,000. The fair market value of these assets was negligible. Class 10.1 - Once the president of Bostik saw how high the taxable benefit on his BMW 650 was, he ordered it sold. It had cost $120,000 in 2019. Because it had high mileage and was an unpopular colour, Bostik could only get $50,000 for it. Class 53 - Since the manufacturing equipment was technologically old and the new equipment would be leased, all of the manufacturing equipment was sold for total proceeds of $27.000. Its original cost was $450,000. Other Information: 1. The company leases one floor of a building for $36,000 per year. It houses the headquar- ters of Bostik, including the office of the president. The lease was negotiated on January 1, 2017, and has an original term of five years. There are two renewal options on the lease. The term for each of these options is three years. The company made $38,000 of lease- hold improvements immediately after signing the lease. No further improvements were made until the current year. 2. On September 24, 2020, one of the company's trucks fell into a sinkhole and disappeared. (The driver was making a delivery at the time and captured the slow fall on his cell phone.) At the time of the accident, the fair market value of the truck was $32,300. The proceeds from the company's insurance policy amounted to $30,000. The original cost of the truck was $45,000. 3. In early 2020, one of Bostik's employees developed a unique manufacturing process that the company intends to market to other manufacturers. Bostik wanted to charge $50,000 for a licence with a 10 year life. However, they eventually accepted a payment of $100,000 for a licence that has an unlimited life. No internal costs were allocated to this process. 4. It is the policy of the company to deduct maximum CCA in all years. Required: Calculate the maximum 2020 CCA that can be taken on each class of assets, the January 1, 2021, UCC balance for each class, and any other 2020 income inclusions or deduc- tions resulting from the information provided in the problem. Assignment Problem Five - 5 (CCA Calculations Over 3 Years) Barry's Books is an unincorporated business that began operations on July 1, 2018. The owner/ operator is Barry Levin and his business is selling historically important books (e.g., first edi- tions). All of his sales are in Ontario At the inception of his business he acquired a number of assets as follows: Furniture and fixtures with a cost of $170,000. duck at a cost of $43,000 1 2 4 9 Capital Cost Allowance (CCA) 6 7 Revised UCC Recapture 10 3 Beginning UCC 5 Disposals 8 Terminal Loss 12 CCA Class number Description Additions Accll 1-a 1-b 13 Ending UCC $624,000.00 $106,250.00 $74,160.00 Adjusted UCC $650,000.00 $187,500.00 $92,700.00 11 CCA Rate 4% 10% 20% 30% 30% $650,000.00 Nil $95,000.00 $17,850.00 New Building 62500 $650,000.00 $125,000.00 $92,700.00 0 30,000 125000 1200 -3500 60,000 $26,000.00 $18,750.00 $18,540.00 2,677.5 13,500 President's Car President's Car 30,000 15,000 45,000 16,500 8 10.1 10.1 14 14.1 44 Goodwill 5% Nil $68,000.00 Nil $65,000.00 Nil 53
