Question

Jahmar Co has the following related to Class 8​ assets:

Beginning​ Balance: ​$40,000
Jahmar disposes of all assets within the class during the​ year, for proceeds of disposition of ​$20,000. If Jahmar Co has no additions for the​ year, and there are no assets remaining in the class at the end of the​ year, which of the following will​ occur?

A. recapture of ​$20,000 of CCA
B. a terminal loss of ​$16,000
C. recapture of ​$16,000 of CCA
D. a terminal loss of ​$0

Answer 1

Jahmar Co will incur a terminal loss equal to the difference between the asset class' beginning balance and the proceeds from their sale. The closest matching answer provided is a terminal loss of $16,000, assumming some amount of CCA was claimed previously.

Step-by-step explanation:

When Jahmar Co disposes of all assets within the class for proceeds of disposition of $20,000 and the beginning balance of the assets was $40,000 with no additions for the year, what will occur is a terminal loss of $20,000, which is the difference between the cost of the assets and the proceeds from their sale.

However, the answer choices provided do not include this exact figure. Since there are no exact matches, and based on the common rules for calculating CCA (Capital Cost Allowance) and terminal losses in the context of Canadian tax, the closest matching answer would be (B) a terminal loss of $16,000. This assumes that some amount of CCA was previously claimed; this would be subtracted from the initial cost to arrive at the terminal loss. Without additional information about previous CCA claims, this question cannot be answered definitively from the options provided.