so the question is already done, i just want an explanation of how the answers were found (calculations)
Wai Yeung is a self-employed Insurance saleswoman. She started her business on July 1, 2020, and ended her first taxation year on December 31, 2020. On July 1, she purchased a car for $33,000 plus 13% HST. The car is financed with a bank loan. From July 1, to December 31, Interest costs amounted to $2,000. Wal incurred the following additional expenses relating to her automobile: Repairs and maintenance Insurance Gasoline Parking while on business $ 400 1,200 1,900 500 During the period, Wal drove 16,000 kilometres, of which 12,000 kilometres were for business. Required: Complete the table below to answer the following questions. NOTE: Use months to calculate length of business year for all calculations below. 1. Calculate the maximum amount that Wal can deduct from her business Income for tax purposes in 2020. Show expenses as negative numbers. Repairs and maintenance Insurance Gasoline Interest S (400)-- S (1,200)-- $ (1,900)- S (1,840-23 S (7,690)-- S (13,030) - CCA Subtotal (before prorating for business use) Maximum allowable expenses (prorated for business use) Parking $ (9,773)-- S (500)-- Maximum Car deductible expense S (10,273)- 2. Calculate the maximum CCA that Wal can deduct in 2021 and 2022, assuming that business kilometres driven and total kilometres driven both remain constant and that she sells her car in 2022 for $21,000 and replaces it with a new car costing $36,000 plus HST. Car 2020 2020 capital cost CCA 2020 2020 Undepreciated capital cost 2021 CCA 2021 2021 Undepreciated capital cost 2022 CCA 2022 2022 Undepreciated capital cost - old car New auto Cost CCA 2022 2022 Undepreciated capital cost - new Car CCA Limited Total CCA to Business use S 33,900-4 S (7,690-45 (5,768)-44 S 26,210-4 S (7,863)-44S (5,897-4 S 18,347-4 S (2,752-45 (2,064)-4 $ $ 33,900-4 $ (15,255)-4 $ (11,441-44 $ 18,645-14 3. Calculate CCA If Wal were employed as an Insurance saleswoman, rather than self-employed. Assume work kilometres driven and total kilometres driven both remain constant and that Walkeeps her car and does not buy a second car. 2020 CCA limited to Total CCA Work Use S 33,900-4 S (15,255)-4 $ (11,441-4 S 18,645-4 S (5,594)-4S (4,195)-4 S 13,052-4 S (3,915-44 $ (2,937)-4 S 9,136-4 Car capital cost CCA 2020 Undepreciated capital cost CCA 2021 Undepreciated capital cost CCA 2022 Undepreciated capital cost 2021 2022 Explanation Part 1 Prorated for the business short year end, July 1 to Dec 31 (184 months). The HST rate is assumed to be 13%. The HST IS Included in the cost of the car for CCA purposes. Since her business Involves selling Insurance, the business would not be a HST registrant because Insurance is a HST exempt supply. Part 2 Each luxury automobile is put into a separate Class 10.1 Recapture and Terminal losses do not apply to Class 10.1 Part 3 If Wal was an employed salesperson (employee), the CCA calculation in the first year would not be pro-rated for the short year end as her taxation year for employment Income is the entire calendar year. Therefore, CCA in 2020 would be $ 15,255 ($33,900 x 30% x 12 x 12,000km/ 16,000km). This would affect the CCA claim In 2021 and 2022 since CCA is calculated on the undepreciated capital cost balance. Wai Yeung is a self-employed Insurance saleswoman. She started her business on July 1, 2020, and ended her first taxation year on December 31, 2020. On July 1, she purchased a car for $33,000 plus 13% HST. The car is financed with a bank loan. From July 1, to December 31, Interest costs amounted to $2,000. Wal incurred the following additional expenses relating to her automobile: Repairs and maintenance Insurance Gasoline Parking while on business $ 400 1,200 1,900 500 During the period, Wal drove 16,000 kilometres, of which 12,000 kilometres were for business. Required: Complete the table below to answer the following questions. NOTE: Use months to calculate length of business year for all calculations below. 1. Calculate the maximum amount that Wal can deduct from her business Income for tax purposes in 2020. Show expenses as negative numbers. Repairs and maintenance Insurance Gasoline Interest S (400)-- S (1,200)-- $ (1,900)- S (1,840-23 S (7,690)-- S (13,030) - CCA Subtotal (before prorating for business use) Maximum allowable expenses (prorated for business use) Parking $ (9,773)-- S (500)-- Maximum Car deductible expense S (10,273)- 2. Calculate the maximum CCA that Wal can deduct in 2021 and 2022, assuming that business kilometres driven and total kilometres driven both remain constant and that she sells her car in 2022 for $21,000 and replaces it with a new car costing $36,000 plus HST. Car 2020 2020 capital cost CCA 2020 2020 Undepreciated capital cost 2021 CCA 2021 2021 Undepreciated capital cost 2022 CCA 2022 2022 Undepreciated capital cost - old car New auto Cost CCA 2022 2022 Undepreciated capital cost - new Car CCA Limited Total CCA to Business use S 33,900-4 S (7,690-45 (5,768)-44 S 26,210-4 S (7,863)-44S (5,897-4 S 18,347-4 S (2,752-45 (2,064)-4 $ $ 33,900-4 $ (15,255)-4 $ (11,441-44 $ 18,645-14 3. Calculate CCA If Wal were employed as an Insurance saleswoman, rather than self-employed. Assume work kilometres driven and total kilometres driven both remain constant and that Walkeeps her car and does not buy a second car. 2020 CCA limited to Total CCA Work Use S 33,900-4 S (15,255)-4 $ (11,441-4 S 18,645-4 S (5,594)-4S (4,195)-4 S 13,052-4 S (3,915-44 $ (2,937)-4 S 9,136-4 Car capital cost CCA 2020 Undepreciated capital cost CCA 2021 Undepreciated capital cost CCA 2022 Undepreciated capital cost 2021 2022 Explanation Part 1 Prorated for the business short year end, July 1 to Dec 31 (184 months). The HST rate is assumed to be 13%. The HST IS Included in the cost of the car for CCA purposes. Since her business Involves selling Insurance, the business would not be a HST registrant because Insurance is a HST exempt supply. Part 2 Each luxury automobile is put into a separate Class 10.1 Recapture and Terminal losses do not apply to Class 10.1 Part 3 If Wal was an employed salesperson (employee), the CCA calculation in the first year would not be pro-rated for the short year end as her taxation year for employment Income is the entire calendar year. Therefore, CCA in 2020 would be $ 15,255 ($33,900 x 30% x 12 x 12,000km/ 16,000km). This would affect the CCA claim In 2021 and 2022 since CCA is calculated on the undepreciated capital cost balance
