Choice a) Includes charitable donation, which is deductible in the calculation of taxable income but not

net income for tax purposes. Choice b) Neglects to adjust for non-deductible portion of entertainment
expense. Choice d) Adds CCA and deducts depreciation. 97. Answer: c. When the last depreciable asset
in a class is disposed of and a positive balance remains, that balance may be deducted as a terminal loss
against other taxable income. No CCA is claimed in the year of disposition for Class 8 assets. $15,000 -
$10,000 = $5,000 Choice a) Assumes the positive balance results in a recapture to be added back. Choice
b) Incorrectly deducts CCA in Year 12. Choice d) Incorrectly deducts CCA in Year 12 and assumes a
recapture. 2013 Sample Entrance Examination CMA Canada Page 71 98. Answer: d. Small business
deduction = 17% x the lesser of active business income and taxable income = 17% x $315,000 = $53,550
Choice a) Uses active business income: 17% x $330,000 = $56,100 Choice b) Takes the difference:
$330,000 - $315,000 = $15,000 Choice c) Uses the difference between the limit and active business
income: $500,000 - $330,000 = $170,000 99. Answer: d. A deemed disposition occurs when property is
disposed of even though there are no proceeds of disposition. The use of Sally’s car changed from
personal to business, which is a deemed disposition. 100. Answer: a. 75% of the expenditure is added to
the Cumulative Eligible Capital and the deduction is 7%: ($80,000 x 75% x 7%) = $4,200 Choice b)
Assumes that the customer list is not deductible. Choice c) Uses a half-year rule applied to entire
expenditure: $80,000 x 7% x 50% = $2,800 Choice d) Applies 7% rate to entire expenditure. Neglects the
75% that is eligible: $80,000 x 7% = $5,600 2013 Sample Entrance Examination CMA Canada Page 72
Supplement of Formulae and Present Value Tables Formulae 1. CAPITAL STRUCTURE a) After-Tax
Marginal Cost of Debt: k k T or ( ) T I F b = − − 1 ( ) 1 where k = interest rate; T = corporate tax rate; I =
annual interest payment on debt; F = face value of debt b) Cost of Preferred Shares: k D NP p p p = where
Dp = stated annual dividend payment on shares; NPp = net proceeds on preferred share issue c) Cost of
Common Equity: i) Cost of Common Shares (Capitalization of Dividends with Constant Growth Rate): k D
NP e g e = + 1 where D1 = dividend expected for period 1; NPe = net proceeds on common share issue;