Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bob Biddle operates a small engineering consulting business in Edmonton, AB (unincorporated business). The current years income statement for accounting purposes at December 31 shows:

Bob Biddle operates a small engineering consulting business in Edmonton, AB (unincorporated business). The current years income statement for accounting purposes at December 31 shows: Consulting fees $790,000 Other expenses ($281,000) Net Income $509,000 Income tax ($180,000) Net income $329,000 Included in Other Expenses are the following amounts: (a) A $25,000 bonus declared to Bobs wife, who is the bookkeeper for the business on December 30 of the current year. Bob did not get around to signing his wifes bonus cheque until September of the following year. (b) Financing fees paid to acquire a bank loan of $5,000 (c) Life insurance premiums of $5,000 on a life insurance policy for Bob. The life insurance policy was required in order to obtain the bank loan (mentioned above). (d) Interest of $1,000 for filing GST returns late (e) The corporation pays Bob an auto allowance of $1.00 per km, and during the year Bob drove 5,000 kilometres for work purposes. For simplicity, assume that the automobile allowance limit set by tax authorities in the current year is $0.54 per km. (f) Accounting depreciation on furniture and fixtures is $2,000. The UCC in Class 8 is $16,500 (g) Salaries of $221,000 (not including the bonus mentioned above) were paid to Bob and all of the other employees of the corporation. Please note that salaries paid to Bob and his wife are considered reasonable and all other employees are not related to Bob. (h) Advertising costs of $12,000 were paid to an American engineering journal, which is only distributed throughout the United States. Required: Calculate net business income for tax purposes for Bob's business. Explain any items not included in your calculations.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Management Accounting

Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Dave Burgstahler, Jeff O. Schatzberg

16th Global Edition

0273790013, 978-0273790013

More Books

Students also viewed these Accounting questions

Question

The boundary-value problem Y" = 4(y x), 0 x 1, y(0) = 0, y(1) = 2

Answered: 1 week ago