Fortunato Inc. is a business that is located in Ontario. The HST rate in Ontario is 13 percent. When the Quick Method is used in the province, the remittance rate is 4.4 percent for a retail business and 8.8 percent for a service provider. All of the Company's revenues and expenses are incurred in Ontario and it files its HST return on an annual basis. It has one associated business which had sales of taxable goods totaling $190,000 (before HST) for the current year. Fortunato Inc.'s Income Statement for the current year is as follows (all amounts are without the inclusion of applicable HST): Revenues: Sales Of Fully Taxable Goods $196,400 Provision Of Exempt Services 41,600 $238,000 Less nse Cost Of Goods Sold ($107,600) Amortization Expense ( 18,300) Salaries And Wages ( 14,400) Interest Expense ( 4,600) Other Operating Expenses ( 37,900) ( 182,800) Income Before Taxes $ 55,200 Less: Federal And Provincial Income Taxes ( 16,000) Net Income $ 39,200 Other Information: 1. Inventories of taxable goods increased by $13,200 (before HST) during the year. 2. A capital expenditure was made during the year at an HST inclusive cost of $101,700. The expenditure was for equipment that will be used 64 percent for the provision of fully taxable goods. HST was paid on the acquisition of all assets on which amortization is being taken during this period. 3. All of the Other Operating Expenses involved the acquisition of fully taxable supplies and were acquired to assist in the provision of fully taxable supplies. 4. Of the Salaries And Wages, 75 percent were paid to employees involved in providing exempt services. Required: A. Determine if Fortunato Inc. is eligible to use the Quick Method. B. Calculate the net HST payable or refund that Fortunato Inc. will remit or receive for the current year using regular HST calculations. C. Assume that Fortunato Inc. is eligible to use the Quick Method at the 4.4 percent rate. Calculate the net HST payable or refund that Fortunato Inc. will remit or receive for the current year using the Quick Method and determine whether it would be advantageous for Fortunato to use the Quick Method. Fortunato Inc. is a business that is located in Ontario. The HST rate in Ontario is 13 percent. When the Quick Method is used in the province, the remittance rate is 4.4 percent for a retail business and 8.8 percent for a service provider. All of the Company's revenues and expenses are incurred in Ontario and it files its HST return on an annual basis. It has one associated business which had sales of taxable goods totaling $190,000 (before HST) for the current year. Fortunato Inc.'s Income Statement for the current year is as follows (all amounts are without the inclusion of applicable HST): Revenues: Sales Of Fully Taxable Goods $196,400 Provision Of Exempt Services 41,600 $238,000 Less nse Cost Of Goods Sold ($107,600) Amortization Expense ( 18,300) Salaries And Wages ( 14,400) Interest Expense ( 4,600) Other Operating Expenses ( 37,900) ( 182,800) Income Before Taxes $ 55,200 Less: Federal And Provincial Income Taxes ( 16,000) Net Income $ 39,200 Other Information: 1. Inventories of taxable goods increased by $13,200 (before HST) during the year. 2. A capital expenditure was made during the year at an HST inclusive cost of $101,700. The expenditure was for equipment that will be used 64 percent for the provision of fully taxable goods. HST was paid on the acquisition of all assets on which amortization is being taken during this period. 3. All of the Other Operating Expenses involved the acquisition of fully taxable supplies and were acquired to assist in the provision of fully taxable supplies. 4. Of the Salaries And Wages, 75 percent were paid to employees involved in providing exempt services. Required: A. Determine if Fortunato Inc. is eligible to use the Quick Method. B. Calculate the net HST payable or refund that Fortunato Inc. will remit or receive for the current year using regular HST calculations. C. Assume that Fortunato Inc. is eligible to use the Quick Method at the 4.4 percent rate. Calculate the net HST payable or refund that Fortunato Inc. will remit or receive for the current year using the Quick Method and determine whether it would be advantageous for Fortunato to use the Quick Method
