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Module 6 Business Income Exercise Solutions

The document provides accounting information for several years of business including income statements, balance sheets, capital cost allowance schedules, and reconciliation of net income. It includes details of asset sales, inventory calculations using LIFO and FIFO, and deductions from net income such as CCA and donations.

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hoda
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25 views

Module 6 Business Income Exercise Solutions

The document provides accounting information for several years of business including income statements, balance sheets, capital cost allowance schedules, and reconciliation of net income. It includes details of asset sales, inventory calculations using LIFO and FIFO, and deductions from net income such as CCA and donations.

Uploaded by

hoda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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1st sale POD 300000

ACB 100000
Capital gain 200000
Taxable capital gain 100000 3(b)

2nd sale POD 350000


ACB 200000
Income 150000 3(a)
no
yes
no
no
no
yes
Reconciliation Schedule
Net income per financial statements
Add: Tennis Club Fees
Amortization
Political Contributi
Charitable Donatio
Groceries
Kids wages
Rick's salary
Meals & Entertain
Insurance (life)
Prepaid Insurance
Interest on taxes
speeding ticket

Net business income for tax purposes


1st year of business - short fiscal period; prorate CCA by days
r financial statements (2,075) Class UCC add deduct UCC
12000 Deduct: CCA 28099 8 0 50000 50000
7820 10.1 0 30000 30000
650 12 0 6200 6200
200 50 0 5000 5000
800
19200
24000
2500
1200
400
445
180

69395 28099 41296


ncome for tax purposes 39,221
rorate CCA by days 245 0.671233
recapture TermLoss 1/2 yr rule AII UCC Rate CCA UCC
25000 75000 20% 10068 39932
15000 45000 30% 9062 20938
6200 100% 6200 0
2500 7500 55% 2769 2231
28099
Reconciliation Schedule
Accounting Net Income
Add:

Division B (net) income for tax purposes


Division C

Testing Ltd. Taxable income


Reconciliation Schedule
Accounting Net Income 183,000
Recapture 35,000 Deduct: CCA 55,274
Amortization 42,000 20% of cost of shares 2100
Loss on disposition of assets 5,900
Income tax deducted 62000
Inventory shrinkage double ded 235,000
Life insurance - VP marketing 2,000
Cost of issuing shares 10,500
Charitable donation 5,000
Hockey game tickets 3,000
Meals and Entertainment 11,000
Golf course membership 6,500
Interest on taxes 4,900
422,800 57,374 365,426
Division B (net) income for tax purposes 548,426
Division C
Charitable donations (can be carried forward for 5 years) 5,000

Testing Ltd. Taxable income 543,426


Deduct: lesserL=I+J-K O=.5(J-K. P=L+M-N+O
Beginning cost or proce Revised Terminal if any) Adjusted CCA
Class UCC Additions Disposals UCC Recapture Loss AccII UCC Rate
1 115,000 (150,000) (35,000) 35,000 - 6%
8 40,000 (4,000) 36,000 36,000 20%
10 50,000 12,000 (14,000) 48,000 48,000 30%
10.1 8,000 (6,000) - - - - 30%
10.1 30,000 30,000 15,000 45,000 30%
14 3,974 3,974 3,974 s/l
13 100,000 100,000 50,000 150,000 s/l
35,000

Class 14 Calculate daily CCA rate 21.9539 16,026 UCC remaining at Jan 1, 2019 3,974

Reconciliation Schedule (partial)


Accounting Net Income 183000
Add: Recapture 35,000 Deduct: CCA 55,274
Amortization 42,000
Loss on disposition 5,900

Assets sold
Building Class 8 Class 10 Class 10.1
POD 150000 4000 14000 6000
ACB 275000 4500 17000 40000
Cannot have a capital loss on a depreciable asset

Query for client


Income Statement
Other Inc Note 7 25000
Note 7 loss on sale of assets 5900
Capital assets 2. Sold building for 150,000, NBV 180,000 = loss on sale of building $30,000; where is this reported?
S=L-R
Ending
CCA UCC
- -
7,200 28,800
14,400 33,600
1,200 -
13,500 16,500
3,974 -
15,000 85,000
55,274

this reported?
Reconciliation Schedule
Net income per financial statements
Add: Alan's Salary
Amortization expense
Golf Club Fees
Political contributions
Income tax expense
Alan's appropriation -inventory
Meals and Entertainment
Alan's home expenses
Life insurance premium
Interest on tax
Wife's cost at convention
Convention meals
Travel meals
Entertainment
Fines and penalties

Net business income

Opening Inv
Purchases
COGA
Ending Inventory
COGS
statements 0
60000 Deduct: CCA 81200
58800 Convert LIFO to FIFO 7,000
1500 AFDA 5000
200
75,000
600
1500
10000
1000
500
1000
125
1,000
1250
900
213,375 93200 120,175
3(a) 120,175

LIFO FIFO
50000 52,000
75,000 75,000
125000 127,000
30,000 25,000
95,000 102,000

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