Betty Boop is a 24 year old single mother of a 2 year old child.

Betty graduated from Ontario Tech U in 2018 with a BComm. She borrowed through OSAP to finance her degree, making the loan eligible for any related tax benefit. Betty makes payments at the end of each month on this loan. On January 1, 2021 her outstanding balance for this student loan was $20,000 with a locked in interest rate of 2.8% compounded monthly for the next 60 months, at which time the loan will have been fully repaid. The balance owing on December 31, 2021 was $16,220.55.

On January 1, 2021, Betty owned a 3 year old Honda Civic which was in excellent condition and debt free. The average selling price, for cars of this type and condition, on December 31, 2021 was $13,200.

Betty Boop purchased a Townhouse in Whitby, Ontario on January 1, 2021, with a $180,000 mortgage, representing 80% of the purchase price. Her first mortgage payment of $807.51 was made on January 30, 2021 with monthly payments to be made at the end of each month for 5 years. The mortgage rate was 2.5% (fixed) compounded monthly, amortized over 25 years. The fair value of her Townhouse on December 31, 2021 was $250,000, and the balance owing on the mortgage was $174,750.00.

Bettys employer pays salaries monthly, on the last day of each month. Her employer deducts $720.35 for income tax every month as well as the legally required deductions for CPP and EI (assume these required deductions are spread evenly over the 12 month period January-December). The CPP basic exemption for 2021 was $3,500 and the employee contribution rate was 5.45% with an annual maximum of $3,166.45. The EI employee contribution rate was 1.58% with an annual maximum of $889.54. Bettys employer deducts $40 per month for union dues and $150 per month for contribution to the company pension plan, as well as $25 per month directed to Bettys personal RRSP with her bank. The RRSP was set up effective January 1, 2021 and earns interest of 1.5% compounded monthly. Betty has no other sources of income. Bettys gross salary for 2021 was $65,000.

Betty Boops other typical monthly recurring expenses during 2021 were:

Electricity and natural gas $ 200.00

Cell, TV and internet 130.00

Food (average) 400.00

Clothing (average) 75.00

Entertainment 50.00

Parking 40.00

Car + Home Owner Insurance 146.00

Child care 150.00

Gas and car maintenance 100.00

Betty pays for all of these expenses using her credit card which has a payable date of the 27^th of each month. These bills all lag by one month, so, for example, her January credit card bill is for expenses incurred during the prior month December.

During 2021, Betty Boop did not face any extraordinary expenses, so her monthly net cash flow was deposited into her chequing account, which did not earn interest. On January 1, Bettys chequing account balance was $2,000.00.

When purchasing her home, Betty withdrew all her savings and investments to meet the down payment and legal fees. However, she maintained her emergency fund in a TFSA invested in a money market account at 1% compounded daily. On January 1, 2021 her TFSA was valued at $10,000. Any interest earned is deposited back to this TFSA. If an emergency arises, and Betty needs to withdraw funds, she forfeits any interest that would have been earned during the year which did not happen in 2021.

Required:

Part 1: Calculate Betty Boops

a) monthly deduction for CPP

b) monthly deduction for EI

c) monthly payment on her student loan

d) cash inflow for January 2021

e) cash outflow for January 2021

f) net cash for January 2021

Part 2: As at December 31, 2021, calculate Betty Boops:

a) Current Assets

b) Long term Assets

c) Current Liabilities

d) Long term Liabilities

e) Net Worth

f) Current Ratio

g) Debt Ratio

h) Comment on the meaning of these ratios.

Part 3: As of December 31, 2021:

a) What is the amount of interest income that Betty Boop will declare for her 2021 Tax and Benefit Return

b) Calculate Betty Boops Taxable Income

c) Identify each Federal non-refundable tax credit Betty is eligible for and the gross amount.

d) Calculate the amount of Federal tax credit that will be applied for Betty Boop.

e) Explain the difference between refundable and non-refundable tax credits