Question

4. The initial cost of purchasing a device is $12,000. The salvage value of the device at the end of four years is $3,500. Compute the depreciation schedule for the device by the following methods: Straight-line depreciation (5 pts) Sum-of-years’-digits depreciation (10 pts) CCA depreciation as a Class 43 asset (10 pts) CCA depreciation as a Class 29 asset (10 pts)

Answer 1

i) SLM

(12000-3500) / 4 = 2125

ii) Sum of years digits method

	8500
Year	Dep Base	Remainig useful Life	Dep fraction	Dep Expense
1	8500	4	4/ 10	3400		0.4
2	8500	3	3/ 10	2550		0.3
3	8500	2	2/ 10	1700		0.2
4	8500	1	1/ 10	850		0.1
Sum		10		8500
4+3+2+1 = 10

iii) CCA rate of 30% eligible machinery and equipment used in Canada primarily to manufacture and process goods for sale or lease that are not included in Class 29 or 53.

1- 12000*30% = 3600

2- 3600*70% or (12000-3600)*30% = 2520

3- 2520*70% = 1764

4- 1764*70% = 1234.8

iV) CCA for Class 29 using the straight‑line method as follows: in the first year claim up to 25%, in the second year claim 50%, and in the third year the remaining 25%. Any amount that is not claimed in a year can be claimed in a later year.

1 - 3000 (12000*25%)

2- 6000 (12000*50%)

3- 3000 (12000*25%)

4- 0