If the Asset Described in Question 57 Had a CCA

question 25

Multiple Choice

If the asset described in Question 57 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:

Consolidation Worksheet

A document used in preparing consolidated financial statements that combines the financial data of parent and subsidiary companies.

Revalued Above Cost

When an asset's market value increases beyond its historical cost, leading to an adjustment in the book value.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its identifiable net assets.