If a Leased Asset Were Scrapped from a Continuing CCA

question 65

Multiple Choice

If a leased asset were scrapped from a continuing CCA pool after four years, and its UCC were $10,000 and its salvage is zero, what would the present value of this asset's tax shelter be if the appropriate after-tax borrowing rate is 9%, the CCA rate is 20%, and the tax rate is 40%?

• A)- $2,759
• B)- $1,955
• C)+ $10,000
• D)+ $2,759

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Definitions:

Planning Budget

A financial forecast or projection, detailing expected revenues and expenses within a future period.

Net Operating Income

The profit a company generates from its regular business operations, excluding expenses and revenues from non-operating activities.

Client-visits

The act of meeting with clients or potential clients, often for the purposes of discussing business opportunities, providing services, or strengthening relationships.

Activity Variance

The difference between the budgeted and actual amount of an activity, such as hours worked or units produced, affecting budget and cost planning.