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AFM 362 (14)
Lecture 5

AFM 362 Lecture 5: Chapter-5 AFM 362

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Department
Accounting & Financial Management
Course
AFM 362
Professor
Ken Klassen
Semester
Winter

Description
Fancy sewing machine $10000 Can we reduce our Division B income if we delay buying it in February 2017 and buy it in December 2017 instead? It looks better on our books in December than in February. Terminal Loss occurs when positive number but no more assets in the class. LOCP Disposal – ex. Proceeds were $700 but Costs were $500, so take $500 because it’s lower. For luxury autos:  Only up to $30,000 value for CCA  No disposal allowed  No recapture no terminal loss  CCA of last year = 50% x 30% x balance Hardwood in the office. Cost $20000 Office lease = 4 years + 2 two-year renewal period CCA in year one $20000 / 5 = 4000 $20000 / 4+2 = 3333 Half-year rule = 3333 / 2 = 1666.67 CCA in year two = 3333 Problem 1 Opening Adds Disposals Balance Deduct Balance CCA Recapture/ Add ½ Closing balance ½ adds (Terminal balance Loss) 225000 0 -250000 -25000 0 0 0 25000 0 0 30000 0 -3000 27000 0 27000 20% CCA 0 0 21600 20000 6000 -7000 19000 0 19000 30% CCA 0 0 13300 13000 0 -15000 0 0 0 -1950 0 (not 0 0 (30% x ½) allowed) Total CCA – 13650 Total Recapture - 25000 Total UCC – refer to table Accounting treatment: proceeds - net book value Tax treatment: proceeds - cost = capital gain Building 250000 – 180000 = 70000 book gain 250000 – 275000 = 0 capital loss Class 8 asset 3000 – 3600 = -600 book gain 3000 – 6500 = 0 capital loss Class 10 asset 8000 – 5500 = 2500 book gain 8000 – 7000 = 1000 capital gain TCG = 500 Class 10.1 15000 – 35000 = -20000 book gain 15000 – 45000 = 0 capital loss Book Depreciation (Cost – net book value) xxxxx CCA -13050 Recapture 25000 Book gains
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