Payson Company Bought $40,000 Worth of Office Equipment at the Beginning

question 125

Multiple Choice

Payson Company bought $40,000 worth of office equipment at the beginning of Year 1. This equipment has a useful life of eight years and a salvage value at the end of its useful life of $4,000. This equipment is in Class 7 with capital cost allowance (CCA) rate of 15%. The income tax rate is 40%.
- What is the maximum amount of CCA that the company can deduct for tax purposes for Year 1?

• A) $2,700.
• B) $3,000.
• C) $5,400.
• D) $6,000.

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Definitions:

Sheridan Broadcasting

A media company known for its operations in radio broadcasting, particularly in serving African American communities.

Good Faith

An honest intention to act without taking an unfair advantage over another party, often related to contractual dealings.

Honest Belief

Refers to a genuine conviction or acceptance of a fact without intention to deceive, often considered in legal contexts to determine the sincerity of a person’s actions or statements.

Liability Provision

A clause within a contract or agreement that specifies the conditions under which a party is liable for certain outcomes, damages, or losses.