Math (Straight Line) Flashcards
suppose XYZ Ltd. is located in a building that was purchased two years ago for $1,000,000. The building has an economic life of 10 years with no salvage value. Annual depreciation is calculated using the straight- line method. If XYZ Ltd. earned a net income of $450,000 this year and claimed $38,400 of capital cost allowance this past year, what is XYZ’s taxable income this year?
(1) $511,600
(2) $488,400
(3) $394,600
(4) $387,400
1
ok think we figured it out, the equation for straight line is
cost - salvage value /time period
so this would be
1,000,000 - (no salvage cost) divided by (10 years)
=100,000
100,000 + (450,000 net income) -38,400 (capital cost allowance) =
511,600!!!
450,000-38,400 + 100,000 (depreciation using straight line) = 511,600
not sure how this works but…
Fanny Mac Ltd. purchased a small commercial building for $225,000 of which $100,000 was the value of the land. Fanny, the company president, felt this was an excellent deal because she would have been willing to pay as much as $250,000. One year later Fanny sold the property for $300,000.
If, at the time of purchase, the expected economic life of the building was 10 years, there was an estimated salvage value of $25,000 at the end of that time, and Fanny uses the straight-line depreciation method, what is the depreciation expense for the year?
(1) $10,000
(2) $12,500
(3) $20,000
(4) $25,000
1
first determine cost of the building
$225,000 - $100,000
=$125,000
then subtract the salvage value ($25,000)
=100,000
then divide by the time periods (10 years)
= $10,000
A company pays $97,835 for an asset on which the Income Tax Act allows capital cost allowance at 5% per year. The asset is expected to have a useful life of 25 years and will have no salvage value at the end of this time. Calculate the depreciation expense for accounting purposes for the asset’s third year if the accountant chooses to use straight-line depreciation.
(1) $3,913.40
(2) $4,414.80
(3) $4,891.75
(4) $4,505.41
1
97,835/25 years
=$3,913.40
do not factor in the capital cost allowance!
A company has just bought a truck for $22,500. It is expected that the truck can be sold for $3,000 fifteen years from now. The current market value of the vehicle is $27,000. Using the straight-line method, what is the annual depreciation expense?
(1) $1,300
(2) $1,500
(3) $1,600
(4) $1,800
1
22,500 - 3000 divided by 15 years
= 1,300.00
Arco Architects recently purchased $19,000 worth of new office furniture, but with their quantity discount the final cost was only $17,100. It is expected that the furniture can be sold at the end of its 10 year life for
$1,500. What is the annual depreciation expense if Arco uses the straight-line method?
(1) $1,750
(2) $1,560
(3) $1,710
(4) $1,900
2
17,100 - 1,500
=15,600
15,600/10 years
=$1,560.00 per year
A company pays $97,635 for an asset on which the Income Tax Act allows capital cost allowance at 5% per year. The asset is expected to have a useful life of 25 years and will have no salvage value at the end of this time. Calculate the depreciation expense for accounting purposes for the asset’s third year if the accountant chooses to use straight-line depreciation.
(1) $3,913.40
(2) $4,185.49
(3) $4,521.72
(4) $3,905.40
4
97635 divided by 25= $3,905.40
