PROBLEM TWO A wholesale business with a December 31 year end purchased new equipment on November 25, 2018, for $40,000. Before 2018, the business owned no other equipment. Required: (a) What are the tax consequences if the business sells the equipment in 2020 for (i) $15,000? (ii) $23,000? (iii) $46,000? (b) How would your answer to (i) and (ii) change if on December 31, 2020, the business acquired new equipment costing $1,000? Would it be advisable to delay the purchase by one day (that is, until January 1, 2021)? PROBLEM THREE Maple Enterprises Ltd. has always claimed maximum CCA. The following information relates to the corporation's capital transactions: 1. The undepreciated capital cost of certain CCA classes at the end of the previous taxation year was as follows: Class 1 $200,000 (one building in class) Class 8 190,000 2. In 2020, the company expanded into the manufacturing business by purchasing the following assets: Equipment (manufacturing) $30,000 Product licence for an indefinite period 10,000 3. The building was sold in 2020 for $260,000 (original cost-$230,000). 4. During 2020, the company purchased office furniture for $14,000. Required: (a) Calculate the net increase or decrease in the corporation's net income for tax purposes for 2020. (b) Given that the 2020 taxation year has passed, can any action be taken in the 2021 taxation year to reduce the net income for tax purposes for 2020? Explain. PROBLEM TWO A wholesale business with a December 31 year end purchased new equipment on November 25, 2018, for $40,000. Before 2018, the business owned no other equipment. Required: (a) What are the tax consequences if the business sells the equipment in 2020 for (i) $15,000? (ii) $23,000? (iii) $46,000? (b) How would your answer to (i) and (ii) change if on December 31, 2020, the business acquired new equipment costing $1,000? Would it be advisable to delay the purchase by one day (that is, until January 1, 2021)? PROBLEM THREE Maple Enterprises Ltd. has always claimed maximum CCA. The following information relates to the corporation's capital transactions: 1. The undepreciated capital cost of certain CCA classes at the end of the previous taxation year was as follows: Class 1 $200,000 (one building in class) Class 8 190,000 2. In 2020, the company expanded into the manufacturing business by purchasing the following assets: Equipment (manufacturing) $30,000 Product licence for an indefinite period 10,000 3. The building was sold in 2020 for $260,000 (original cost-$230,000). 4. During 2020, the company purchased office furniture for $14,000. Required: (a) Calculate the net increase or decrease in the corporation's net income for tax purposes for 2020. (b) Given that the 2020 taxation year has passed, can any action be taken in the 2021 taxation year to reduce the net income for tax purposes for 2020? Explain
