On Jan 1, 2020 Mary began a self-employed, unincorporated coffee business, Mary’s Caffeine Delights. Mary would like assistance preparing her 2020 tax return. She provided you with this unaudited statement of income:

Sales revenue: $95,000

Less provision for returns…………………………$ 1200

Cost ogf goods sold…………………………………..22,000………….23200

Gross profit……………………………………………………………………..71,800

Expenses

Travel…meals…………………………………………….1500

Travel-accomodation…………………………………2000

Travel-..car operating expenses………………….2350

Sales manager’s convention…………………………600

Salaries pd. To staff…………………………………..30000

Health Club dues………………………………………. 2200

Child care/housekeeping

(nanny-single parent)…………………………………12000

Home office expenses………………………………….1400

Telephone bills……………………………………………… 350

Office supplies…………………………………………….. 1700

Entertainment…drinks and meals………………….1800

Private dental plan (for staff members)…………2400

Restaurant structural renovation…………………21200

Amortization………………………………………………….3800

Total expenses……………………………………………………………………..83,300

Business loss before tax………………………………………………………..(11,500)

Mary has provided the following additional information:

• Mary used her personal vehicle for all her business travel. The $2,350 represents her total expenses for the 12-month period. Her travel log included business mileage of 14,400kms. The total number of kms. driven in 2020 totalled 18,000kms.
• Mary would like to deduct all of her nanny expenses against her income since the expenses were incurred to earn income.
• Mary feels that $380 of her accounts receivable balance is uncollectible because the customers recently declared bankruptcy. Mary did not provide for this bad debt expense in her financial statements.
• The renovation of the coffee shop included new walls, flooring, an office for Mary and a kitchen.
• Mary set up a home office. She uses the office to complete here administrative work in the evenings. The home office expenses relate to a proportion of heat, light and power.

Mary would like you to calculate her income for tax purposes, ignoring CCA.

Answer rating: 100% (QA)

Calculation of total income Particulars Amount Business los... View the full answer