Reference no: EM132981107

Question: Chazerai Ltd. is engaged in manufacturing and processing, which is 95% of their business, with a December 31 year-end. On January 1, 2020, the undepreciated capital cost for each class of its assets was as follows:

Class 1-MB
- building
$316,558
Class 8
- office furniture and equipment
60,000
Class 10.1
- automobiles
11,550
Class l2
- small tools
5,000
Class 13
- leasehold improvements
175,000

The following additional information was found in the 2020 audit files:

(1) The building, which cost $564,309 in 2014, was sold for $260,000. It was the only building in Class 1 MB at the time of its sale. The underlying land was sold for proceeds equal to the original cost. Chazerai Ltd purchased a new building in August 2020 for $600,000.

(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 were sold for more than original cost.

(3) Some small tools were sold for a total of $7,000. All of these tools were sold at a price less than their original cost.

(4) The opening balance in Class 13 represents leasehold improvements of $210,000 made during August 2018 to the leased warehouse. During 2020, further leasehold improvements were made to the same leased warehouse at a cost of $24,000. The remaining lease term was five years with two successive two-year renewal terms.

(5) The Class 10.1 automobile was purchased in December 2018 for $34,000. During 2020, it was sold for $21,000. A new automobile was purchased for $45,200, which included HST of $5,200 (13%).

(6) A license (expected to be used indefinitely) was purchased for $60,000 in June 2020.

(7) A new computer was purchased in January 2020 for $7,000.

(8) Chazerai Ltd. is registered to collect and remit HST.

Required:
Prepare a schedule to show the maximum deductions for tax purposes available to Chazerai Ltd. for 2020 based on the above information.