For the year ending December 31, 2017, the Income Statement of Combs Proprietorship, prepared in accordance with generally accepted accounting principles, is as follows:

 

Other Information:

1. The Proprietorship spent $6,000 during the year on landscaping for its new building. For accounting purposes this was treated as an asset. The Proprietorship did not amortize this balance as it believes the work has an unlimited life.

2. Selling and Administrative Costs included $15,000 in business meals and entertainment.

3. Other Expenses included contributions to registered charities of $3,700.

4. Other Expenses included bond discount amortization of $2,500.

5. Selling and Administrative Costs included membership fees for several employees in a local golf and country club. These fees total $3,400.

6. Selling and Administrative Costs included $5,000 for a 75-inch hi-definition television that Marvin installed in his home.

7. On January 1, 2017, the Proprietorship had the following UCC balances:

Class 1 $400,000

Class 8 575,000

Class 10 45,000

Class 13 68,000

The Class 1 balance related to a single building acquired in 2000 at a cost of $550,000. It was estimated that the value of the land at that time was $50,000. On February 1, 2017, this building was sold for $612,000. It is estimated that the value of the land was unchanged at $50,000. In the accounting records, this real property was carried at $507,000, $457,000 for the building and $50,000 for the land. The resulting gain on the building was included in the accounting revenues. The old building was replaced on February 15, 2017 with a new building acquired at a cost of $683,000 of which $60,000 was allocated to land. The new building was added to the same Class 1.

There are no dispositions of Class 8 assets during the year. However, there were acquisitions in the total amount of $126,000.

As the Proprietorship had decided to lease all of its vehicles in the future, all of the assets in Class 10 were sold during the year. The capital cost of these assets was $93,000 and the proceeds of disposition amounted to $37,000. The net book value of these assets was $52,000 and the resulting accounting loss of $15,000 was included in Other Expenses.

The Class 13 balance related to a single lease that commenced on January 1, 2015. The lease had an initial term of seven years, with two successive options to renew for three years each. Expenditures on this leasehold were $50,000 in 2015 and $27,000 in 2016. There were no further expenditures in 2017. The write-off of these expenditures for accounting purposes was included in Amortization Expense.

8. Other Expenses included interest on late income tax instalments of $500.

9. The proprietorship deducts maximum CCA.

Required:

Part A: Prepare a Reconciliation Schedule in excel to reconcile accounting net income to net business income for tax purposes.

Part B: Prepare a Capital Cost Allowance Schedule in good form in excel.

Transcribed Image Text:

Revenues. Expenses: Cost Of Goods Sold Selling And Administrative Costs Amortization Expense Other Expenses Income Before Tax Expense Income Tax Expense: Current Future Net Income ($272,000) (132,000) (156,000) (137,000) ($ 97,000) ( 32,000) $973,000 (697,000) $276,000 (129,000) $147,000 Revenues. Expenses: Cost Of Goods Sold Selling And Administrative Costs Amortization Expense Other Expenses Income Before Tax Expense Income Tax Expense: Current Future Net Income ($272,000) (132,000) (156,000) (137,000) ($ 97,000) ( 32,000) $973,000 (697,000) $276,000 (129,000) $147,000

Answer rating: 100% (QA)

a Reconciliation of Accounting Net Income to Net Business Income for Tax Purposes Accounting Net Inc... View the full answer