If the Asset Described in Above Question Had a CCA

question 105

Multiple Choice

If the asset described in above Question had a CCA rate of 30%, with the usual half-year rule, and were leased for 5 years, how would the lessee treat the five years of CCA? The lessee tax rate is 40%.The asset class uses declining balance.

• A)lessee would calculate the CCA amounts for each of the five years, apply the tax rate against these amounts, and show these amounts as cash outflows.
• B)lessee would calculate the CCA amounts for the entire life of the asset, and show those amounts as cash flows.
• C)lessee would ignore the CCA, since it is the lessor's financial province.
• D)lessee would treat the CCA calculations for each of the five years of the lease as cash inflows for the lessor.

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Definitions:

Golgi Tendon Organs

Sensory receptors located at the junction of tendons and muscles, sensitive to changes in muscle tension.

Inhibitory Neuron

Neuron that produces IPSPs and has an inhibitory influence.

Alpha Motor Neurons

Neurons that innervate skeletal muscle fibers, playing a critical role in the initiation of muscle contraction.

Patellar Tendon

The tendon that connects the patella (kneecap) to the tibia (shinbone), playing a crucial role in the extension of the knee.