Answer the following questions only:
18 (1) (a) Non-deductible life insurance
2 (1) (e.2) president 5 x 300 = 1500
vice-president 2000
20 (1) (e) Legal fees issuance of shares 29300 x 80% = 23440
20 (1) (e) Costs re bank loan 46100 x 80% = 36880
18 (1) (b) Costs re equipment purchase 38700
RPP overcontribution 2490
20 (1) (a) CCA -5835000
Each year, you can have 20% of the expense of the fees that you have spent in order to be able to issue shares or get a loan.
- In 18(1)(a), where is the 5 from?
- Why do we multiply by 80% for legal fees issuance of shares and costs re bank loan but not for costs re equipment purchase?
- How was the number for RPP overcontribution got?
- Why are the other deductions not included and only CCA subtracted?
Problem 14 You have been assigned to the audit team for B.B. JAMS Ltd, one of your significant clients. Below is the income statement prepared by the company's accountant for the December 31, 2023, year end. Notes: Through various discussions with the accountant, you have been able to determine that the following information has been recorded in the financial statements: (1) JAMS had a number of items of inventory that did not sell well in the current year. For accounting purposes, the accountant has recorded a reserve for inventory obsolescence. The reserve was calculated based on the carrying value of any inventory item that had not had a sale in the last 180 days. The reserve at year end was $1,285,000. (2) JAMS provides insurance for employees and paid the following amounts to Nat Insurance Company during the year: $2,000,000 insurance policy on the life of the president included in insurance $1,000,000 insurance policy on the life of the vice-president - marketing Group term life insurance for employees included in salaries and benefits ($37,00012 months ) JAMS is the beneficiary of the policies on the president and vice-president. On June 1, 2023, JAMS renegotiated its bank debt, and due to the ever-increasing responsibilities of the president, the bank 100 Fured the insurance policy on the life of the president as part of the collateral for the loan. The premiuns on the policy are equal to the net cost of pure insurance for the policy. (3) An analysis of the professional fees for 2023 revealed the following expenses: Costs incurred to defend the comp the bangful dismissal charge . . 59,600 ment from a determine value of repairs completed costs were $139,000. Of this, $23,500 Appraisal costs to were substantial redone. The total included in general and administrative in general and administrative expenses the rel ex] sho - All of the amounts were paid in the year. (6) The salaries and benefits account shows contributions for certain employees to the company's regi plar cont is made available (7) In early November 2023, JAMS announced an early retirement package that was made available to employees over the age of 60 . In order to provide employees with the time required to assess the offer, the deadline for accepting the package has been set at February 15, 2024. While no formal replies were received as of December 31,2023 , the personnel manager anticipates a high acceptance rate. She expects that the costs associated with the packages will be $672,000. This cost has been accrued in the 2023 financial statements. (9) The other income includes a loss on the sale of various fixed assets of $35,900. (10) During the year, the company had cash on hand for a short period of time due to the timing of certain contract payments. The funds earned interest income of $10,400 while they were held. Other Information: (11) The accountant has calculated that JAMS is entitled to claim capital cost allowance of $5,835,000 in 2023. You have confirmed that this calculation is correct. (12) In reviewing the income tax assessments, you noted that JAMS had been charged interest of $4,900 on the late payment of instalments. You discussed this with the accountant and determined that the interest was recorded in the income tax expense account. \4,850 Based on the information that you have obtained, your manager has asked you to calculate the income from business for tax purposes for JAMS for December 31,2023. He also wants you to show all calculations whether or not they seem relevant to the final answer and comment on all items omitted from the calculation
