A Major Objective of Capital Cost Allowance for Tax Depreciation

question 19

Multiple Choice

A major objective of capital cost allowance for tax depreciation is to

• A) reduce the amount of depreciation expense claimed for income tax purposes.
• B) assure that the amount of depreciation for income tax and book purposes will be the same.
• C) help taxpayers achieve a faster write-off of their capital assets.
• D) require taxpayers to use the actual economic lives of assets in calculating tax depreciation.

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Definitions:

Fixed

Typically refers to costs or assets that remain constant and do not vary with the level of activity or production.

Linear Relationship

A direct relationship between two variables that can be represented graphically as a straight line, indicating consistent proportionality.

Relevant Range

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Activity Level

The volume of production or the degree of activity in a business operation, which can affect variable costs.