On March 1, 2018, Jennifer Brown came to you to figure out her Capital Cost Allowance for the calendar year 2017 for her company called ABC Investments Ltd.
An examination of the capital cost allowance schedule for 2017 provided the following opening balances (January 1, 2017) for the undepreciated capital cost for each class of ABC’s assets:
— office furniture and equipment
— trucks for transportation of goods
— small tools
— leasehold improvements
— Patent and rights limited life
The following additional information was found in the 2017 fixed asset schedules working paper files.
1. The building which cost $697,426 in 1987 was sold for $150,000. It was the only building in Class 3 at the time of its sale. A new building was purchased (non used) in April 2017 for $750,000. Also, in February 2017 a lot adjacent to the new building, was purchased for $100,000 for use as a parking lot by employees and visitors. This lot was paved at a cost of $25,000 (Class 17). A fence (Class 6) was erected around an outside storage area near the new building at a cost of $40,000.
2. New office furniture was purchased for $20,000. This purchase replaced old assets which were sold for $5,000. None of the old assets was sold for more than capital cost.
3. Three small trucks purchased in 2012 for $12,000 each were traded in for three new trucks. Each new truck was priced at $15,000, but this was reduced by a trade-in credit of $2,500 for each old truck.
4. Some small tools were sold for a total of $7,000. All of these tools were sold at a price less than their capital cost.
5. Leasehold improvements had been made to a leased warehouse at a cost of $225,000 in 2015. The remaining length of the lease in that year was six years with two successive renewal options of three years each. Further leasehold improvements were made to this warehouse in 2017 at a cost of $21,000.
6. During 2017, an unlimited life franchise was purchased for $48,000.
7. Computer software for Microsoft word and excel were purchased in 2017 for $750
8. Accounting gains and losses on the above asset sales netted to nil.
You have been asked to prepare a schedule showing all your work calculating the maximum capital cost allowance, any recapture or terminal losses for the fiscal years ended December 31, 2017 ignoring HST considerations. Ignore the effects, if any, of a leap year.