An asset with a purchase cost of $96 422 and a CCA rate of 40% has a market value of $4 000 at the end of its 10-year life. Assume this asset is the only asset in its class. Which of the following statements about this situation is correct?
A) There is a recapture of $2 704
B) There is a terminal loss of $2 467
C) There is a recapture of $2 133
D) There is a terminal loss of $1 736

Question

Quizplus · Accepted Answer

The recapture is calculated as the difference between the market value and the undepreciated capital cost. The undepreciated capital cost is the purchase cost minus the accumulated depreciation. The accumulated depreciation is the purchase cost multiplied by the CCA rate multiplied by the number of years the asset has been in use. In this case, the undepreciated capital cost is $96,422 - (0.40 x $96,422 x 10) = $16,067. The recapture is therefore $4,000 - $16,067 = $2,704.

An Asset with a Purchase Cost of $96 422 and a CCA