Belmont Plastic Ind. operates a production division in Calgary in a leased building. The division produces extruded plastic containers for the local bottling plant of Cotex Ind. Some of the financial information relating to the operation of the Calgary division of Belmont Plastic Ind. for the fiscal year ending on April 30, 2002 is given below. Belmont Plastic Ind. sells some of its production equipment (extrusion and packaging machines) during the fiscal year and replace it by new equipment.
Material and supplies $4,000,000
Other costs $1,300,000
Loan payment (total) $5,400,000
The interest portion of the (total) loan payment $890,000
Lease payment (building) $780,000
Equipment purchase during the year $3,500,000
Equipment sale during the year $900,000
The book value of the equipment
at the beginning of the fiscal year $12,500,000
CCA (capital cost allowance) rate for the equipment 30%
Income tax rate 40%
a) the equipment CCA (capital cost allowance) for the fiscal year (according to the Canadian Tax law) and its book value at the end of the fiscal year.
b) the before-tax cash flow
c) the income tax payable
d) the after-tax cash flow
The question belongs to Finance and it discusses about calculating the equipment capital cost allowance, the before tax cash flow, income tax payable and after tax cash flow for a business.
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