Reference no: EM132629179

Anja is an advisor. She uses her own car to travel to various locations to meet clients. She acquired a car on 1 March 2020 for $57,000. The acquisition cost was funded entirely by a loan at an interest rate of 10%. She has determined that the depreciation deduction on the car would be $5,700 for the year.

In addition, Anja incurred the following expenses during the year:

Registration and insurance = $5,000;

Repairs and maintenance = $300; and

Oil and fuel costs = $4,100.

For the period 1 March 2020 to 30 June 2020, Anja estimates that the car travelled a total of 12,000 kilometres; 8,000 of which were for business purposes. You may assume that Anja has maintained all necessary records and a logbook. Assume that depreciation has been adjusted for partial year use and the impact of the car limit.

Problem i. Calculate Anja's deduction for car expenses under "cents per kilometre" method

Problem ii. Calculate Anja's deduction for car expenses under log book method

Problem iii. Which method is preferable for Anja and why?