Oland Ltd. is a CCPC with a December 31 year end. For the year ending December...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Oland Ltd. is a CCPC with a December 31 year end. For the year ending December 31, 2021, the income statement of the company, prepared in accordance with generally accepted accounting principles (ASPE), is as follows: Revenues Expenses: Cost of goods sold Selling and administrative costs Amortization expense Charitable donations Operating income Gain on sale of property Loss on sale of vehicles Gain on sale of investments Dividends received (see Note) Net income before taxes ($ 776,257) (394,672) (125,489) ( 27,000) $ 153,600 (55,000) 11,000 123,400 Note The components of the dividends received are as follows: Eligible dividends from Canadian public companies Non-eligible dividends from 80% owned subsidiary (the subsidiary received a dividend refund of $15,000 from its non-eligible RDTOH) Non-eligible dividends from wholly owned subsidiary (no dividend refund) Total dividends received $1,625,986 (1,323,418) $ 302,568 233,000 $ 535,568 $ 62,300 48,000 13,100 $123,400 Oland is associated with both of the subsidiaries. The two subsidiaries have each been allocated $125,000 of the small business deduction's business limit. The remaining $250,000 has been allocated to Oland. Other Information: 1. Selling and administrative costs include $22,490 in business meals and entertainment. 2. Selling and administrative costs includes interest on late income tax instalments of $1,240 and on late municipal tax payments of $625. 3. Selling and administrative costs includes bond discount amortization of $3,850. 4. During 2021, Oland Ltd. acquired a competing business at a price that included goodwill of $110,400. For accounting purposes, there is no impairment or write-down of the goodwill in 2021. 5. Selling and administrative costs include membership fees for several employees in a local golf and country club. These fees total $7,285. 6. As the company expects to issue more shares during 2021, it made a number of amend- ments to its articles of incorporation and included the legal costs in selling and administra- tive costs. These costs totalled $11,482. 7. On January 1, 2021, the company had the following UCC balances: Class 1 Class 8 Class 10 Class 13 Class 14.1 $582,652 575,267 75,348 88,600 Nil The class 1 balance relates to a single real property acquired in 2001 at a cost of $750,000. It is estimated that the value of the land at this time was $50,000. On February 1, 2021, this property is sold for $850,000. It is estimated that, at this time, the value of the land has increased to $80,000. In the accounting records, the carrying value of this real property was $696,400, $646,400 for the building and $50,000 for the land. K The old building is replaced on February 15, 2021, with a new building acquired at a cost of $923,000, of which $86,000 is allocated to the land. As the building is used more than 90% for non-residential purposes, it qualifies for the special 6% CCA rate. The appropriate election is made with the CRA to include this property in a separate class. No elections are made with respect to the replacement of the building. During 2021, class 8 properties were acquired at a cost of $226,000. Class 8 properties with a capital cost of $185,000 were sold for $210,000. The class 8 properties were paintings by Canadian artists, and each was sold for an amount in excess of its capital cost. The accoun- tant had not amortized them for accounting purposes. Class 8 contains a large number of properties at the end of 2021. As the company has decided to lease all of its vehicles in the future, all of the class 10 properties are sold during the year. The total capital cost of these properties was $142,000 and the proceeds of disposition amounted to $43,000. The carrying value for accounting purposes was $98,000. The class 13 balance relates to a single lease that commenced on January 1, 2016. The lease has an initial term of seven years, with two successive options to renew for three years each. At the inception of the lease, the company spent $110,000 on leasehold improve- ments. On January 1, 2018, an additional $44,800 was spent on further improvements. 8. It is Oland's policy to deduct maximum amounts of CCA. 9. During 2021, Oland spends $18,500 landscaping the grounds of its new building. For accounting purposes this was treated as an asset. However, the company will not amortize this balance because it believes the work has an unlimited life. 10. Investments were sold during the year for $126,000. The adjusted cost base of these invest- ments and carrying value for accounting purposes was $115,000. 11. On January 1, 2022, Oland had the following balances: Eligible RDTOH Non-eligible RDTOH $ 39,660 Nil $162,345 GRIP During 2020, Oland designated $12,350 of its dividends as eligible. 12. During 2021, Oland paid $42,300 in dividends. Of this total, $26,300 were designated as eligible. 13. At the beginning of 2021, Oland had a $23,000 net capital loss balance from 2018. It also had a 2018 non-capital loss balance of $36,400. The company would like to deduct as much as possible of these two carry overs during 2021. 14. All of Oland's taxable income is considered to have been earned in a province in the year. 15. It has been determined that Oland has $300,289 of active business income. Of this total, $43,000 results from manufacturing and processing activity. Because of special rates in the province in which it operates, Oland makes a separate calculation of the M&P deduction. 16. For 2020, Oland and its associated companies had combined adjusted aggregate investment income of $48,900 and taxable capital employed in Canada of $8,900,000. Required: Show all of the calculations used to provide the following required information, including those for which the result is nil. A. Determine Oland's minimum net income for tax purposes and taxable income for the year ending December 31, 2021. Include in your solution the January 1, 2022, UCC balance for each CCA class. B. Determine Oland's Part I tax payable for the year ending December 31, 2021. C. Determine the refundable portion of Oland's Part I tax payable for 2021. D. Determine Oland's Part IV tax payable for the 2021. E. Determine the December 31, 2021, balance in Oland's GRIP. F Determine the December 31, 2021, balances in Oland's eligible RDTOH and non-eligible RDTOH. G. Determine Oland's dividend refund for 2021, separately identifying the refund related to eligible dividends and the refund related to non-eligible dividends. H. Determine Oland's net federal tax payable for 2021. Oland Ltd. is a CCPC with a December 31 year end. For the year ending December 31, 2021, the income statement of the company, prepared in accordance with generally accepted accounting principles (ASPE), is as follows: Revenues Expenses: Cost of goods sold Selling and administrative costs Amortization expense Charitable donations Operating income Gain on sale of property Loss on sale of vehicles Gain on sale of investments Dividends received (see Note) Net income before taxes ($ 776,257) (394,672) (125,489) ( 27,000) $ 153,600 (55,000) 11,000 123,400 Note The components of the dividends received are as follows: Eligible dividends from Canadian public companies Non-eligible dividends from 80% owned subsidiary (the subsidiary received a dividend refund of $15,000 from its non-eligible RDTOH) Non-eligible dividends from wholly owned subsidiary (no dividend refund) Total dividends received $1,625,986 (1,323,418) $ 302,568 233,000 $ 535,568 $ 62,300 48,000 13,100 $123,400 Oland is associated with both of the subsidiaries. The two subsidiaries have each been allocated $125,000 of the small business deduction's business limit. The remaining $250,000 has been allocated to Oland. Other Information: 1. Selling and administrative costs include $22,490 in business meals and entertainment. 2. Selling and administrative costs includes interest on late income tax instalments of $1,240 and on late municipal tax payments of $625. 3. Selling and administrative costs includes bond discount amortization of $3,850. 4. During 2021, Oland Ltd. acquired a competing business at a price that included goodwill of $110,400. For accounting purposes, there is no impairment or write-down of the goodwill in 2021. 5. Selling and administrative costs include membership fees for several employees in a local golf and country club. These fees total $7,285. 6. As the company expects to issue more shares during 2021, it made a number of amend- ments to its articles of incorporation and included the legal costs in selling and administra- tive costs. These costs totalled $11,482. 7. On January 1, 2021, the company had the following UCC balances: Class 1 Class 8 Class 10 Class 13 Class 14.1 $582,652 575,267 75,348 88,600 Nil The class 1 balance relates to a single real property acquired in 2001 at a cost of $750,000. It is estimated that the value of the land at this time was $50,000. On February 1, 2021, this property is sold for $850,000. It is estimated that, at this time, the value of the land has increased to $80,000. In the accounting records, the carrying value of this real property was $696,400, $646,400 for the building and $50,000 for the land. K The old building is replaced on February 15, 2021, with a new building acquired at a cost of $923,000, of which $86,000 is allocated to the land. As the building is used more than 90% for non-residential purposes, it qualifies for the special 6% CCA rate. The appropriate election is made with the CRA to include this property in a separate class. No elections are made with respect to the replacement of the building. During 2021, class 8 properties were acquired at a cost of $226,000. Class 8 properties with a capital cost of $185,000 were sold for $210,000. The class 8 properties were paintings by Canadian artists, and each was sold for an amount in excess of its capital cost. The accoun- tant had not amortized them for accounting purposes. Class 8 contains a large number of properties at the end of 2021. As the company has decided to lease all of its vehicles in the future, all of the class 10 properties are sold during the year. The total capital cost of these properties was $142,000 and the proceeds of disposition amounted to $43,000. The carrying value for accounting purposes was $98,000. The class 13 balance relates to a single lease that commenced on January 1, 2016. The lease has an initial term of seven years, with two successive options to renew for three years each. At the inception of the lease, the company spent $110,000 on leasehold improve- ments. On January 1, 2018, an additional $44,800 was spent on further improvements. 8. It is Oland's policy to deduct maximum amounts of CCA. 9. During 2021, Oland spends $18,500 landscaping the grounds of its new building. For accounting purposes this was treated as an asset. However, the company will not amortize this balance because it believes the work has an unlimited life. 10. Investments were sold during the year for $126,000. The adjusted cost base of these invest- ments and carrying value for accounting purposes was $115,000. 11. On January 1, 2022, Oland had the following balances: Eligible RDTOH Non-eligible RDTOH $ 39,660 Nil $162,345 GRIP During 2020, Oland designated $12,350 of its dividends as eligible. 12. During 2021, Oland paid $42,300 in dividends. Of this total, $26,300 were designated as eligible. 13. At the beginning of 2021, Oland had a $23,000 net capital loss balance from 2018. It also had a 2018 non-capital loss balance of $36,400. The company would like to deduct as much as possible of these two carry overs during 2021. 14. All of Oland's taxable income is considered to have been earned in a province in the year. 15. It has been determined that Oland has $300,289 of active business income. Of this total, $43,000 results from manufacturing and processing activity. Because of special rates in the province in which it operates, Oland makes a separate calculation of the M&P deduction. 16. For 2020, Oland and its associated companies had combined adjusted aggregate investment income of $48,900 and taxable capital employed in Canada of $8,900,000. Required: Show all of the calculations used to provide the following required information, including those for which the result is nil. A. Determine Oland's minimum net income for tax purposes and taxable income for the year ending December 31, 2021. Include in your solution the January 1, 2022, UCC balance for each CCA class. B. Determine Oland's Part I tax payable for the year ending December 31, 2021. C. Determine the refundable portion of Oland's Part I tax payable for 2021. D. Determine Oland's Part IV tax payable for the 2021. E. Determine the December 31, 2021, balance in Oland's GRIP. F Determine the December 31, 2021, balances in Oland's eligible RDTOH and non-eligible RDTOH. G. Determine Oland's dividend refund for 2021, separately identifying the refund related to eligible dividends and the refund related to non-eligible dividends. H. Determine Oland's net federal tax payable for 2021.
Expert Answer:
Answer rating: 100% (QA)
Certainly Here are the stepbystep calculations for each component A Determining Olands minimum net income for tax purposes and taxable income 1 Start ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
Students also viewed these finance questions
-
Axco Inc. is a CCPC with a December 31 year end. Axco is not associated with any other company. For the 2020 taxation year, its Net Income For Tax Purposes is equal to $342,000. This is made up of...
-
A wholesale business with a December 31 year end purchased new equipment on November 25, 20X0, for $10,000. Before 20X0, the business owned no other equipment. Required: 1. What are the tax...
-
Generally accepted accounting principles (GAAP) notionally follow the matching principle. However, there are exceptions. Explain why the following accounting rules, required under GAAP, violate the...
-
Qualitative data can be graphically represented by using a : Line graph Frequency polygon Bar diagram Ogives
-
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following...
-
Deal Corporation issued 4,000 shares of its $10 par value stock with a market value of $85,000 to acquire 85 percent ownership of Mead Company on August 31, 20X3. Meads fair value was determined to...
-
What is the difference between a fixed-rate and a floating-rate bond?
-
Marcia Saxton worked for Jerry Richardson, a supervisor at AT&Ts International Division. Richardson made advances to Saxton on two occasions over a three-week period. Each time Saxton told him she...
-
This discussion board will be your chance to discuss in broader detail the concepts of Adverse Possession and Squatter's Rights. Using the learning materials and activities from this module, follow...
-
In this exercise, you modify one of the Seminars applications from Chapter 4s Apply lesson. Open the Seminars Solution.sln file contained in the Seminars Solution-RadioButton folder. Create an...
-
Peak expiratory flow (PEF) is a measure of a patient's ability to expel air from the lungs. Patients with asthma or other respiratory conditions often have restricted PEF. The mean PEF for children...
-
(2) [2pt] Write code that prints the user's favorite food and the number of days the user has been eating the food. (hint. there are 365 days in a year) [ ] fav_food = "watermelon" num_years = 1 #...
-
Tenet Healthcare, has a bond issue outstanding with eight years remaining to maturity, a coupon rate of 9 percent with interest paid annually, and a par value of $1,000. The current market price of...
-
The operations vice president of Security Home Bank is investigating the efficiency of the bank's operations. She is concerned about the costs of handling routine transactions at the bank and would...
-
To stimulate the sales of its Royal Frozen dinners, Vaughn Company places 1 coupon in each box. Ten coupons are redeemable for a premium consisting of a hot meal carrier. In 2026, the company...
-
Aldean Company Aldean Company wants to use absorption cost-plus pricing to set the selling price on a new product. The company plans to invest $130,000 in operating assets to produce and sell 13,000...
-
Parallel rays of green mercury light with a wavelength of 546 nm pass through a slit covering a lens with a focal length of 65.0 cm. In the focal plane of the lens the distance from the central...
-
F.(3e* -2x 3 sin(2x)) is equal to 2 3 Cos 8. IT 3, t (4+@ 2 3, 1+o 1 4 Cos 4 4 1 3. 1 +4cos V7 (1+o 4 1 4 Cos 4 1+0 4-
-
Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2011, the records indicate the following data: Required: Use the retail method to approximate cost of ending...
-
The table below contains selected information from recent financial statements of The Home Depot, Inc., and Lowe's Companies, Inc., two companies in the home improvement retail industry ($ in...
-
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares,...
-
(a) In Example 1, show that the line segment connecting \((1 / 2,0,1 / 2)\) and \((1 / 2,1 / 2,0)\) is entirely in the triangular region. (b) Is the point \((1 / 2,1 / 8,3 / 8)\) on this segment? (c)...
-
(a) By using the definition of convexity only, and not Theorem 1, show that the set of points \(\left(x_{1}, x_{2}, x_{3} ight)\) such that: is convex. (b) Show that the intersection of a finite...
-
A function \(f: \mathbb{R}^{n} ightarrow \mathbb{R}\) is called convex if for any \(\mathbf{x}, \mathbf{y} \in \mathbb{R}^{n}\) and \(t \in[0,1]\) Show that a non-constant convex function defined on...
Study smarter with the SolutionInn App