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Math Help - Quick UCC Question

  1. #1
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    Quick UCC Question

    Say I bought something in year 1 for $30 000 and then in year 3, I buy something else for $20 000, with a CCA rate of 30% for all items. What would the base and remaining undepreciated captial cost be for year 4?

    So, first, to get to year 3, I need to apply the CCA rate for two years on the first item.
    Year 1:
    Base UCC = 30 000
    CCA = 30 000 * 0.5 (half year rule) * 30% = 4500
    Remaining UCC = 30 000 - 4500 = 25 500
    Year 2:
    Base UCC = 25 500 (from previous year)
    CCA = 25 500 * 30% = 7650
    Remaining UCC = 25 500 - 7650 = 17 850

    Now, this where I start to feel less confident.
    Year 3:
    Base UCC would be previous year's remaining UCC plus the price of the second item? So that would be 17 850 + 20 000 = 37 850
    But then the CCA has the half-year rule on one thing and not on the other. Separate calculation for each item?
    17 850 * 30% + 20 000 * 0.5 * 30% = 8355
    Remaining UCC = 37 850 - 8355 = 29 495

    And then year 4 I can just take the remaining UCC from year 3 and apply CCA as if there were only one thing.

    Is my understanding of the calculations in year 3 correct?
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  2. #2
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    Keep each purchase SEPARATE (different ledgers);
    like, when 2nd purchase made, keep it by itself;
    add the 2 together to get "net"...
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  3. #3
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    This was how the question was presented, and it seems to strongly suggest keeping everything together...(numbers don't match with above, because I just wanted to see how an example would work out):



    1 (10 marks). St. Jacob Construction Co. had purchased several equipment during the last few years. Its first asset was a tow truck purchased in 2003 for $60,000. In 2005, it purchased a van for $20,000. A second tow truck was bought in 2008 for $50,000. What was the value of their UCC at the end of 2009, given a CCA rate of 30% for all the equipment? Construct a full table from 2003 till 2009 to derive the UCC value of 2009. You need to fill out all the cells in the table and explain the calculation step.

    Year | Adjustment | Base UCC | CCA (30%) | Remaining UCC
    2003 | 60,000
    2004 | 0
    2005 | 20,000
    2006 | 0
    2007 | 0
    2008 | 50,000
    2009 | 0
    Last edited by BlackBlaze; March 29th 2010 at 07:32 PM. Reason: Table was destroyed, fixing it...
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  4. #4
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    Quote Originally Posted by BlackBlaze View Post
    This was how the question was presented, and it seems to strongly suggest keeping everything together...
    You're missing my point.
    Keep a separate account/ledger for each, in order to do the calculations
    applicable to each (hide the darn things if you wish!).
    Then combine them in order to "keep everything together"...
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  5. #5
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    The net results end up the same, regardless of whether or not I keep the calculations for each item apart from another. Is this merely to keep things orderly and logical?

    In other words, does that mean my original logic is not flawed?
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  6. #6
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    Quote Originally Posted by BlackBlaze View Post
    >The net results end up the same, regardless of whether or not I keep the calculations
    > for each item apart from another. Is this merely to keep things orderly and logical?

    YES. To make the calculations less confusing, particularly in years
    when purchases are made.

    > In other words, does that mean my original logic is not flawed?

    YES. You were correct. There's only one way to deduct 15% in year
    of purchase, then 30% in subsequent years!
    You can get residuals at any year-end by formula;
    example: $60,000 purchase; residual end of year 6?
    [p=60000, y=6]
    1: 51000 : .85p
    2: 35700
    ...
    6: 8572

    Formula: .85p[.7^(y-1)]
    .85(60000)(.7^5) = ~8572
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