Angie's Amazing Getups Incorporated is a Canadian controlled private corporation with a head office in London,...

   

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Angie's Amazing Getups Incorporated is a Canadian controlled private corporation with a head office in London, Ontario. The company is a manufacturer of high end custom costumes and makeup used in movie and theatre productions with sales in Canada and the U.S. The company started in business in 2017 when the sole shareholder, Angela Q. Snodgrass, was photographed by the paparazzi after a particularly enthusiastic night of partying. When Angela saw herself on the front page of every tabloid newspaper the next day, she knew that fame was not for her. Since Angela was a highly trained clothing designer and makeup artist, she felt she would be able to use those skills to start her own business and keep out of the limelight. In November 2020, after discovering that her bookkeeper, Ponzi Madoff, had been defrauding her, Angela fired him and took over the bookkeeping responsibilities herself, despite having a limited knowledge of accounting. She has produced the following Income Statement and miscellaneous financial information for the year ended December 31, 2020, and needs your help: 292 pach 5 Chapter 6 Assignment Problems 2. General And Administrative Expenses include: Donations To Registered Charities Accrued Bonuses - Accrued September 1, 2020, Paid June 15, 2021 Meals And Entertainment Costs: $1,000 Per Month For Premium Membership At Golf Club For Angie $200 Per Month For Momberships At Golf Club For Salespeople $32,000 For Meals While Entertaining Clients $5,000 In Food Costs For Angie's Personal Chef For Her Meals At Home $6,000 For Annual Summer BBQ For All Staff Sponsorship Of Various Theatre Productions That Use Angie's Costumes Advertising In A U.S. Theatre Magazine Directed At U.S. Clients New Software Purchased October 1, 2020 ($13,000 For Applications And $25,000 For Systems) Accounting And Legal Fees For Amended Articles Of Incorporation Costs To Attend Annual Convention Of Costume Designers Held In Thailand. 3. Interest Expense consists of the following: Interest Expense - Operations Penalty And Interest For Late And Insufficient Instalment Payments Interest On Late Payment Of Municipal Property Taxes many facturing. 50,000 •475,000 $5,000 2,000 1,500 4. Travel costs (included in General and Administrative costs) include both air travel and travel reimbursement to employees for business travel. The company policy is to reimburse employees $0.63 per kilometre for the business use of their automobiles. During the year, seven employees each drove 4,000 kilometres on employment-related activities and one employee drove 7,500 kilometres. None of the kilometre based allowances are required to capital assets be included in the income of the employees. 5. Maximum CCA has always been taken on all assets. The undepreciated capital cost bal- s at January 1, 2020, were as follows: 7,500kances Class 1 (4%) Class 8 Class 10.1 Class 14 Class 14.1 Class 44 Class 53 $ 27,000 78,000 $650,000 95,000 17,850 68,000 Nil 65,000 Nil 12,000 2,400 32,000 5,000 6,000 100,000 15,000 38,000 6,000 17,000 6. During 2020, a limited life licence to produce costumes based on a popular theme park was sold for $63,000. The original cost of this licence was $95,000 and its net book value at the time of sale was $80,000. The licence was the only asset in Class 14. 7. Purchases and sales of equipment and other capital assets made during 2020 were as fol- lows (note: some items are discussed in other sections of this problem). All amounts were capitalized for accounting purposes: The company purchased land and constructed a new building on it during the year. The building will be used 95 percent for manufacturing and processing. The cost of the land was $350,000, and the building cost $475,000 to construct. b. The company purchased a new set of furniture for the reception area for $1.200. Income Or Loss From A Business Assignment Problems C. Some outdated desks used by the finance department with a cost of $5,000 were sold for proceeds of $3,500. d. Landscaping of the grounds around the new building cost $35.000 This amount was capitalized for accounting purposes. e. A company car for use by the president of the company was purchased for $90,000. Car This car replaced the only other existing company car, which was purchased in 2018 for $95,000. The old car was sold for $60,000. Car f. A fence around the new building, high enough to prevent the paparazzi from taking pic- tures of Angela while she is at the office, cost $52.000. 293 Capital gain $152,70 8. The company sold some shares that had been purchased several years ago. The capital gain on these shares was $152,708. Angela didn't know how to account for this, so she credited the entire amount to retained earnings. Required: Determine Angie's Amazing Getups Incorporated's minimum Net Income For Tax Purposes for the year ending December 31, 2020. Ignore GST/HST/PST implications. نے retained earne Sales Cost Of Goods Sold Gross profit Expenses: General And Administrative Expenses) Amortization Expense Interest Operating Income Other Income: Angie's Amazing Getups Incorporated Income Statement Year Ending December 31, 2020 Loss On Disposal Of Limited Life Licence Interest Income Income Before Income Taxes Income Taxes Current Future Net Income (852,000) (550,000) ( 8,500) ($182,000) (35,000) $7,578,903 (5,468,752) $2,110,151 (1,410,500) $ 699,651 ( 17,000) 110,532 $ 793,183 (217,000) $ 576,183 During your review of Angela's work and last year's tax return for the corporation, you have made the following notes. 1. In the accounting records, the Allowance For Doubtful Accounts was $25,000 at December 31, 2020, and $20,000 at December 31, 2019. During 2020, the company had actual write-offs of $11,750. As a result, the accounting Bad Debt Expense was $16,750. This amount is included in General and Administrative Expenses on the Income Statement. A review of the listing of receivables (for tax purposes), indicates that the actual items that may be uncollectible total $15,000 at December 31, 2020. In 2019, the company deducted a reserve for bad debts of $13,000 for tax purposes. Angie's Amazing Getups Incorporated is a Canadian controlled private corporation with a head office in London, Ontario. The company is a manufacturer of high end custom costumes and makeup used in movie and theatre productions with sales in Canada and the U.S. The company started in business in 2017 when the sole shareholder, Angela Q. Snodgrass, was photographed by the paparazzi after a particularly enthusiastic night of partying. When Angela saw herself on the front page of every tabloid newspaper the next day, she knew that fame was not for her. Since Angela was a highly trained clothing designer and makeup artist, she felt she would be able to use those skills to start her own business and keep out of the limelight. In November 2020, after discovering that her bookkeeper, Ponzi Madoff, had been defrauding her, Angela fired him and took over the bookkeeping responsibilities herself, despite having a limited knowledge of accounting. She has produced the following Income Statement and miscellaneous financial information for the year ended December 31, 2020, and needs your help: 292 pach 5 Chapter 6 Assignment Problems 2. General And Administrative Expenses include: Donations To Registered Charities Accrued Bonuses - Accrued September 1, 2020, Paid June 15, 2021 Meals And Entertainment Costs: $1,000 Per Month For Premium Membership At Golf Club For Angie $200 Per Month For Momberships At Golf Club For Salespeople $32,000 For Meals While Entertaining Clients $5,000 In Food Costs For Angie's Personal Chef For Her Meals At Home $6,000 For Annual Summer BBQ For All Staff Sponsorship Of Various Theatre Productions That Use Angie's Costumes Advertising In A U.S. Theatre Magazine Directed At U.S. Clients New Software Purchased October 1, 2020 ($13,000 For Applications And $25,000 For Systems) Accounting And Legal Fees For Amended Articles Of Incorporation Costs To Attend Annual Convention Of Costume Designers Held In Thailand. 3. Interest Expense consists of the following: Interest Expense - Operations Penalty And Interest For Late And Insufficient Instalment Payments Interest On Late Payment Of Municipal Property Taxes many facturing. 50,000 •475,000 $5,000 2,000 1,500 4. Travel costs (included in General and Administrative costs) include both air travel and travel reimbursement to employees for business travel. The company policy is to reimburse employees $0.63 per kilometre for the business use of their automobiles. During the year, seven employees each drove 4,000 kilometres on employment-related activities and one employee drove 7,500 kilometres. None of the kilometre based allowances are required to capital assets be included in the income of the employees. 5. Maximum CCA has always been taken on all assets. The undepreciated capital cost bal- s at January 1, 2020, were as follows: 7,500kances Class 1 (4%) Class 8 Class 10.1 Class 14 Class 14.1 Class 44 Class 53 $ 27,000 78,000 $650,000 95,000 17,850 68,000 Nil 65,000 Nil 12,000 2,400 32,000 5,000 6,000 100,000 15,000 38,000 6,000 17,000 6. During 2020, a limited life licence to produce costumes based on a popular theme park was sold for $63,000. The original cost of this licence was $95,000 and its net book value at the time of sale was $80,000. The licence was the only asset in Class 14. 7. Purchases and sales of equipment and other capital assets made during 2020 were as fol- lows (note: some items are discussed in other sections of this problem). All amounts were capitalized for accounting purposes: The company purchased land and constructed a new building on it during the year. The building will be used 95 percent for manufacturing and processing. The cost of the land was $350,000, and the building cost $475,000 to construct. b. The company purchased a new set of furniture for the reception area for $1.200. Income Or Loss From A Business Assignment Problems C. Some outdated desks used by the finance department with a cost of $5,000 were sold for proceeds of $3,500. d. Landscaping of the grounds around the new building cost $35.000 This amount was capitalized for accounting purposes. e. A company car for use by the president of the company was purchased for $90,000. Car This car replaced the only other existing company car, which was purchased in 2018 for $95,000. The old car was sold for $60,000. Car f. A fence around the new building, high enough to prevent the paparazzi from taking pic- tures of Angela while she is at the office, cost $52.000. 293 Capital gain $152,70 8. The company sold some shares that had been purchased several years ago. The capital gain on these shares was $152,708. Angela didn't know how to account for this, so she credited the entire amount to retained earnings. Required: Determine Angie's Amazing Getups Incorporated's minimum Net Income For Tax Purposes for the year ending December 31, 2020. Ignore GST/HST/PST implications. نے retained earne Sales Cost Of Goods Sold Gross profit Expenses: General And Administrative Expenses) Amortization Expense Interest Operating Income Other Income: Angie's Amazing Getups Incorporated Income Statement Year Ending December 31, 2020 Loss On Disposal Of Limited Life Licence Interest Income Income Before Income Taxes Income Taxes Current Future Net Income (852,000) (550,000) ( 8,500) ($182,000) (35,000) $7,578,903 (5,468,752) $2,110,151 (1,410,500) $ 699,651 ( 17,000) 110,532 $ 793,183 (217,000) $ 576,183 During your review of Angela's work and last year's tax return for the corporation, you have made the following notes. 1. In the accounting records, the Allowance For Doubtful Accounts was $25,000 at December 31, 2020, and $20,000 at December 31, 2019. During 2020, the company had actual write-offs of $11,750. As a result, the accounting Bad Debt Expense was $16,750. This amount is included in General and Administrative Expenses on the Income Statement. A review of the listing of receivables (for tax purposes), indicates that the actual items that may be uncollectible total $15,000 at December 31, 2020. In 2019, the company deducted a reserve for bad debts of $13,000 for tax purposes.

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Answer 1 Calculation of Business Income Taxable Working notes in calculation of Income Amortization calculation 2 Calculation of Taxable income from Capital gains 4 Net Taxable income of Angies Incorp... View the full answer