Sarah Shiver owned the following in 2020: · Rental properties originally valued at $275,000 Property 1: land $70,000, building $55,000 Property 2: land $90,000, building $60,000 Net rental income before CCA was $11,000. The UCC on building 1, as of January 1, 2020 was $
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Sarah Shiver owned the following in 2020: · Rental properties originally valued at $275,000 Property 1: land $70,000, building $55,000 Property 2: land $90,000, building $60,000 Net rental income before CCA was $11,000. The UCC on building 1, as of January 1, 2020 was $50,000. The UCC on building 2, as of January 1, 2020 was $40,000. Property 2 was sold in 2020 for $250,000 (land $200,000, building $50,000) · Shares in ABC Inc. (a CCPC) valued at $50,000 Non-eligible dividends paid to Sarah in 2020 totalled $5,000. · Savings of $30,000 Interest earned in 2020 was $1,000. Sarah also worked full-time as a baker in 2020, earning an annual gross salary of $47,000. Sarah is in a 40% tax bracket. Required: Calculate Sarah’s net income for tax purposes in 2020. Assume that Sarah will take the maximum CCA allowed this year on her rental properties.
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