Hoshi Inc a CCPC has December 31 year-end and is in food services business. Shortly after incorporation in 2019, it developed, on its own, a property that it owned into its first family restaurant. In 2022, after incorporating this business for a number of years and ensuring that it was profitable, another restaurant was purchased for $68,000, which included goodwill (an intangible asset). The second restaurant had more of a roadhouse atmosphere. The business had obtained an unlimited liquor license. Which at the time of the purchase was $35,850 and this amount was allocated to the license in the purchase agreement.

Hoshi Inc operated two (2) restaurants until 2024 when it purchased a fast food franchise for an undefined number of years for $103,000. Also, in 2024, it was determined that the original family restaurant would be more successful if it obtained a liquor license. In order to obtain the license a presentation had to be made to the liquor licensing board. Hoshi Inc paid $29,000 in legal fees related to the presentation to the board.

The fast food restaurant was sold in 2026, though it was successful. The value of franchise agreement was determined to be $110,000.

In 2027, the second restaurant was sold for $80,000 worth of goodwill and $60,000 for the liquor license.

Hoshi Inc is also considering a sale of the balance of their restaurants in 2028 and the selling price will include $250,000 for goodwill.

Required

Prepare a schedule calculating the UCC balance for the intangible asset transactions as of January 1, 2029, and determine the impact of the above transactions on income for 2022 through 2028.

Assume that the company took the maximum tax write-offs that it was entitled to each year and that the tax legislation remained unchanged from 2022 to 2029.

Answer rating: 100% (QA)

To calculate the Undepreciated Capital Cost UCC balance for the intangible assets and determine the ... View the full answer