Revenue: Sales Cost of Goods Sold Gross Profit Expenses: Selling Expenses Meal and Entertainment Expenses Salaries...

   

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Revenue: Sales Cost of Goods Sold Gross Profit Expenses: Selling Expenses Meal and Entertainment Expenses Salaries Expense Club Dues Expense Advertising Expense Administrative Expenses: Utilities Expense Depreciation Expense Interest Expense Appraisal and Insurance Expense Charitable Donations Rent Expense (Building) Miscellaneous Expenses Net Income before Extra Ordinary Items Gain (Loss) on Disposal of Building Net Income Before Taxes Provision for Income Taxes Net Income for Accounting Purposes $5,000 235,000 4,000 17,000 6,000 16,000 33,000 14,000 7,000 40,000 5,000 $950,000 270,000 $680,000 $382,000 $298,000 $125,000 $423,000 59,600 $363,400 The following additional information was provided regarding the financial statements and the transactions of the business for the year ending December 31, 2021. NOTES: #1) Included in interest expense was #2) During 2021 they were unable to borrow any additional funds from the bank and therefore they had cash flow problems and decided to pay their income tax instalments late. As a result the CRA charged interest of $1,600. This was included in the interest expense. $15,000 in interest on borrowed money to purchase equipment. #3) The company maintains close relationships with its clients and regularity uses Green Acres Golf Club to close deals with new customers. $4,000 was paid in club dues in 2021. Also, $1,000 of the Meal and Entertainment Expenses relates to taking the family out for supper. 84) The company had management bonuses accrued at December 31, 2021. $84,000 Total bonuses accrued at December 31, 2021. $11,000 of the bonuses will be paid on $73,000 the remaining bonuses will be paid on January 20, 2022 April 5, 2022 #S) Advertising Expense includes $3,000 CAD paid to a USA Broadcaster to entice customers to purchase our products and services. The target of the advertising is the: Canadian_Market #6) Appraisal and Insurance expense contains an amount of determine the values for annual insurance coverage. #8) Miscellaneous expense includes $25 client at their office. $2,000 for an appraisal of all assets to #17) A life insurance policy was taken out on the owner's life in order to provide funding in the event of his death. Life insurance premiums amounted to $3,400 for a parking ticket incurred while meeting with a #9) The company has provided the following balances reflected in the company's books of account and tax records as at January 1, 2021. Type of Asset Brick building Equipment Truck Leasehold Improvements Client List (unlimited life) ACCOUNTING RECORDS Book Value $130,000 $116,000 73,000 17,800 26,000 Cost TAX RECORDS U.C.C. Class #/% 1-Jan-21 $83,000 20,000 7,000 15,167 3/5% 46,000 8/20% 9,200 10/30% 22,880 13/St Line 16,000 9,600 14.1/5% $7,100 $98,000 $62,000 8,500 i) The leasehold improvement represents an improvement to a leased warehouse on January 1, 2019, costing $26,000 The lease is for 4 years with two successive options to renew of 2 years each. The company entered into this lease on January 1, 2019. ii) During 2021 the company made the following expenditures: a) equipment purchased for b) building was acquired for c) a new car was purchased for on October 1, 2021 (Class 1 at 4%), (Passenger Vehicle) For simplicity ignore GST and PST. ii) During 2021 the company disposed of the following assets: Capital Cost Proceeds $241,000 2,000 4,700 *The only assets in the class. Brick building (Class 3) Equipment Truck $130,000 2,400 17,800 REQUIRED: Using the Reconciliation method compute the Net Income for Tax Purposes for the company for December 31, 2021. Show all calculations. You answer must include capital gain/loss computations, capital cost allowance schedules to calculated the maximum CCA that can be deducted from income for 2021, and the UCC balances in the tax accounts on January 1, 2022. (show all calculations) Revenue: Sales Cost of Goods Sold Gross Profit Expenses: Selling Expenses Meal and Entertainment Expenses Salaries Expense Club Dues Expense Advertising Expense Administrative Expenses: Utilities Expense Depreciation Expense Interest Expense Appraisal and Insurance Expense Charitable Donations Rent Expense (Building) Miscellaneous Expenses Net Income before Extra Ordinary Items Gain (Loss) on Disposal of Building Net Income Before Taxes Provision for Income Taxes Net Income for Accounting Purposes $5,000 235,000 4,000 17,000 6,000 16,000 33,000 14,000 7,000 40,000 5,000 $950,000 270,000 $680,000 $382,000 $298,000 $125,000 $423,000 59,600 $363,400 The following additional information was provided regarding the financial statements and the transactions of the business for the year ending December 31, 2021. NOTES: #1) Included in interest expense was #2) During 2021 they were unable to borrow any additional funds from the bank and therefore they had cash flow problems and decided to pay their income tax instalments late. As a result the CRA charged interest of $1,600. This was included in the interest expense. $15,000 in interest on borrowed money to purchase equipment. #3) The company maintains close relationships with its clients and regularity uses Green Acres Golf Club to close deals with new customers. $4,000 was paid in club dues in 2021. Also, $1,000 of the Meal and Entertainment Expenses relates to taking the family out for supper. 84) The company had management bonuses accrued at December 31, 2021. $84,000 Total bonuses accrued at December 31, 2021. $11,000 of the bonuses will be paid on $73,000 the remaining bonuses will be paid on January 20, 2022 April 5, 2022 #S) Advertising Expense includes $3,000 CAD paid to a USA Broadcaster to entice customers to purchase our products and services. The target of the advertising is the: Canadian_Market #6) Appraisal and Insurance expense contains an amount of determine the values for annual insurance coverage. #8) Miscellaneous expense includes $25 client at their office. $2,000 for an appraisal of all assets to #17) A life insurance policy was taken out on the owner's life in order to provide funding in the event of his death. Life insurance premiums amounted to $3,400 for a parking ticket incurred while meeting with a #9) The company has provided the following balances reflected in the company's books of account and tax records as at January 1, 2021. Type of Asset Brick building Equipment Truck Leasehold Improvements Client List (unlimited life) ACCOUNTING RECORDS Book Value $130,000 $116,000 73,000 17,800 26,000 Cost TAX RECORDS U.C.C. Class #/% 1-Jan-21 $83,000 20,000 7,000 15,167 3/5% 46,000 8/20% 9,200 10/30% 22,880 13/St Line 16,000 9,600 14.1/5% $7,100 $98,000 $62,000 8,500 i) The leasehold improvement represents an improvement to a leased warehouse on January 1, 2019, costing $26,000 The lease is for 4 years with two successive options to renew of 2 years each. The company entered into this lease on January 1, 2019. ii) During 2021 the company made the following expenditures: a) equipment purchased for b) building was acquired for c) a new car was purchased for on October 1, 2021 (Class 1 at 4%), (Passenger Vehicle) For simplicity ignore GST and PST. ii) During 2021 the company disposed of the following assets: Capital Cost Proceeds $241,000 2,000 4,700 *The only assets in the class. Brick building (Class 3) Equipment Truck $130,000 2,400 17,800 REQUIRED: Using the Reconciliation method compute the Net Income for Tax Purposes for the company for December 31, 2021. Show all calculations. You answer must include capital gain/loss computations, capital cost allowance schedules to calculated the maximum CCA that can be deducted from income for 2021, and the UCC balances in the tax accounts on January 1, 2022. (show all calculations)

Answer rating: 100% (QA)

To compute the Net Income for Tax Purposes for the company for December 31 2021 we need to calculate the capital gainloss on the disposal of assets pr... View the full answer