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( 3 8 Minutes ) ABC Ltd . is a Canadian private company and is a HST registrant. For the year ended December 3 1
Minutes ABC Ltd is a Canadian private company and is a HST registrant. For the year ended December the financial statements of ABC, prepared in accordance with GAAP, showed net income after income taxes of $ The following amounts were deducted in determining the financial statement net income. Income tax expense $ Contributions to various registered charities $ Amortization expense $ Advertising expense $ for advertising in the Detroit, USA newspaper. The advertising was directed at selling the company's products in the north eastern part of the United States. Warranty reserve $ The company provides warranties on several of its products. The reserve is calculated as a flat percentage of sales for Meals and entertainment $ The company leases a car for the president of the company for use in carrying out her duties of employment as well as for personal use. The total lease payments were $ before the HST tax. There are no refundable deposits associated with the lease and the lease payments do not include any amounts for insurance or licensing. The lease commenced January In January the company paid landscaping costs of $ that were expected to have a useful life of years. These costs were capitalized for accounting purposes and are being amortized on a straight line basis over a period of years. This amortization is included in the amortization expense of $ above. On November the company issued new common shares. The legal and accounting fees related to this issue of shares were $ For accounting purposes, these costs were capitalized to the balance sheet as intangible assets. This amortization is included in the amortization expense of $ above. The following items were also expensed in the income statement: Loss from theft by an employee who worked in the Inventory department $ Cost incurred in connection with negotiations for a new bank loan $ Cost incurred in connection with the acquisition of shares of another company $ The maximum CCA for the year has been correctly determined to be $ Required: Calculate the business income for tax purposes for Indicate why you have not included any of the above items in your calculation. Assume that business income is the company's only source of income.
Minutes
ABC Ltd is a Canadian private company and is a HST registrant. For the year ended December
the financial statements of ABC, prepared in accordance with GAAP, showed net income after
income taxes of $ The following amounts were deducted in determining the financial
statement net income.
Income tax expense $
Contributions to various registered charities $
Amortization expense $
Advertising expense $ for advertising in the Detroit, USA newspaper. The
advertising was directed at selling the company's products in the north eastern part of
the United States.
Warranty reserve $ The company provides warranties on several of its
products. The reserve is calculated as a flat percentage of sales for
Meals and entertainment $
The company leases a car for the president of the company for use in carrying out her duties of
employment as well as for personal use. The total lease payments were $ before the
HST tax. There are no refundable deposits associated with the lease and the lease payments do not
include any amounts for insurance or licensing. The lease commenced January In January the company paid landscaping costs of $ that were expected to have a
useful life of years. These costs were capitalized for accounting purposes and are being
amortized on a straight line basis over a period of years. This amortization is included in the
amortization expense of $ above.
On November the company issued new common shares. The legal and accounting fees
related to this issue of shares were $ For accounting purposes, these costs were capitalized
to the balance sheet as intangible assets. This amortization is included in the amortization expense
of $ above.
The following items were also expensed in the income statement:
Loss from theft by an employee who worked in the Inventory department $
Cost incurred in connection with negotiations for a new bank loan $
Cost incurred in connection with the acquisition of shares of another company $
The maximum CCA for the year has been correctly determined to be $
Required:
Calculate the business income for tax purposes for Indicate why you have not included any of
the above items in your calculation. Assume that business income is the company's only source of
income.
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