London Supplies is a proprietorship owned by John Forthwell. For the taxation year ended December 31, 2020,
Question:
London Supplies is a proprietorship owned by John Forthwell.
For the taxation year ended December 31, 2020, John has determined that his Net Income for accounting purposes is $87,000. In calculating this figure, John used generally accepted accounting principles.
Other Information:
1. As the business is unincorporated, no taxes were deducted in calculating Net Income.
2. IndeterminingaccountingNetIncome,Johndeducted$33,200inamortizationexpense. For the taxation year ending December 31, 2020, John has determined that maximum CCA would be $43,500.
3. Accounting expenses included a reserve for bad debts of $4,500 and a reserve for inventory obsolescence of $8,500.
4. During the year, London Supplies spent $5,300 for landscaping the grounds around its Winnipeg office. In accordance with generally accepted accounting principles, this amount was treated as a capital expenditure. As the work was done late in the year, no amortization was deducted for the current year.
5. Accountingexpensesincluded$12,000inbusinessmeals,aswellas$2,300incharitable donations.
6. The business spent $3,500 for advertisements on a U.S. radio station. As the station is on the border with Manitoba, the audience for this station is largely Canadian residents.
7. John spent $6,200 for advertising circulars, charging the full amount to expense. At December 31, 2020, one-half of these circulars were still on hand.
8. One of John's employees stole cash in the amount of $1,100. As the individual has left town, this amount is unlikely to be recovered.
9. The following additional items were included in the accounting expenses:
Cost Of Sponsoring Local Hockey Team Interest Paid On Building Mortgage
Appraisal Costs On Land To Be Sold Damages Resulting From Breach Of Contract
$ 2,100 6,300 2,100
1,400
Managerial Accounting Tools for Business Decision Making
ISBN: 9781119403999
5th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly