Hayleys Pet Spa (HPS) is a luxury grooming spa located in downtown Ottawa and is a Canadian controlled private corporation HPS started in 2019 when the sole shareholder, Hayley, decided to quit her job as an audit manager to take up a life of serving furry friends HPS has a team that is passionate about making sure you and your pets leave happy and with the best possible experience Hayleys most popular service is her Full Bath Paws Package for dogs This package includes a full grooming deep cleaning and hydrating bath, blow dry, an all over fur trim cut, trimming of the face, shaving of the fur between the pads, a nail trimming and an ear cleaning This package costs between $70 and $170 depending on the size of your furry friend In December 2020, Hayley discovered her accountant was stealing money from her so she decided to take over the bookkeeping herself Although she was a fantastic audit manager, tax was never her forte so shes asking for your help Below is a summary of her 2020 revenues and expenses Revenue Sales $1,832,000 Cost of Goods Sold 1,439,000 Expenses General Admin (G A) 279,000 Other Expenses 54,000 Income Taxes 13,000 Net Income 47,000 Additional Information Included within Sales is an allowance of $1,800 (HPS estimated 0 1 of sales) for returns that they arent able to sell again at full price This is the first time they are recording an allowance like this The Cost of Goods Sold account contains inventory that is valued at average cost HPS keeps a bin in the back where they sell older pet supplies at below cost As at the end of the year, the marked down prices were $700 less than costs in total They have not recorded this in their financial statements Included within G A is the following Contributions to a defined contribution registered pension plan made monthly Contributions made by employees are equally matched by the employer These were expensed in the income statement Hayley (CEO) RPP $19,000 Salary $160,000 Store Manager RPP $12,000 Salary $110,000 HPS paid $1,200 for group term life insurance for the four full time employees HPS paid $600 for a $200,000 term life insurance policy on Hayley HPS is the registered beneficiary of the insurance policy on Hayley The policy was assigned to the bank as collateral for a $400,000 loan from January 1 to August 31, 2020 The loan was repaid on September 1, 2020 The following was taken from within the G A line Charitable donations to the Humane Society $6,000 Concert tickets given to suppliers as Holiday gifts $1,800 Meals and entertainment incurred by Hayley while negotiating with suppliers $2,000 Golf green fees while entertaining suppliers $1,000 Two customer parties and one all staff party (all parties cost the same) $12,000 Accounting fees for the bookkeeping $10,000 Legal fees incurred on the purchase of equipment $1,000 Legal and accounting fees incurred when negotiating a line of credit with the bank $4,000 Depreciation of $45,000 Interest on the loan and line of credit $5,500 Interest on insufficient income tax installments $400 Purchase of some light fixtures for the store expensed due to small dollar amount $1,500 Damages paid under a breach of contract lawsuit from a supplier HPS incurred $15,000 of leasehold improvements during the year for landscaping This amount was added to the capital asset account Last year, legal fees incurred to issue shares to Haley was $1,000 Required Calculate HPSs net income (loss) for tax purposes Show all of your work Begin with net income per the financial statements, and add back deduct for items that have different treatment for tax purposes Comment briefly on why any amounts from the additional information were omitted from the calculation After calculating the total CCA available for HPS you correctly determined it was $50,000

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Hayleys Pet Spa (HPS) is a luxury grooming spa located in downtown Ottawa and is a Canadian controlled private corporation. HPS started in 2019 when

Hayleys Pet Spa (HPS) is a luxury grooming spa located in downtown Ottawa and is a Canadian controlled private corporation. HPS started in 2019 when the sole shareholder, Hayley, decided to quit her job as an audit manager to take up a life of serving furry friends.

HPS has a team that is passionate about making sure you and your pets leave happy and with the best possible experience. Hayleys most popular service is her Full Bath & Paws Package for dogs. This package includes a full grooming - deep cleaning and hydrating bath, blow dry, an all-over fur trim/cut, trimming of the face, shaving of the fur between the pads, a nail trimming and an ear cleaning. This package costs between $70 and $170 depending on the size of your furry friend.

In December 2020, Hayley discovered her accountant was stealing money from her so she decided to take over the bookkeeping herself. Although she was a fantastic audit manager, tax was never her forte so shes asking for your help. Below is a summary of her 2020 revenues and expenses.

Revenue
Sales	$1,832,000
Cost of Goods Sold	1,439,000
Expenses:
General & Admin (G&A)	279,000
Other Expenses	54,000
Income Taxes	13,000
Net Income	47,000

Additional Information:

Included within Sales is an allowance of $1,800 (HPS estimated 0.1% of sales) for returns that they arent able to sell again at full price. This is the first time they are recording an allowance like this.
The Cost of Goods Sold account contains inventory that is valued at average cost. HPS keeps a bin in the back where they sell older pet supplies at below cost. As at the end of the year, the marked down prices were $700 less than costs in total. They have not recorded this in their financial statements.
Included within G&A is the following:
1. Contributions to a defined contribution registered pension plan made monthly. Contributions made by employees are equally matched by the employer. These were expensed in the income statement.
  1. Hayley (CEO)
  3. RPP $19,000
  4. Salary $160,000
  5. Store Manager
    1. RPP $12,000
    2. Salary $110,000
  6. HPS paid $1,200 for group term life insurance for the four full time employees
  7. HPS paid $600 for a $200,000 term life insurance policy on Hayley. HPS is the registered beneficiary of the insurance policy on Hayley. The policy was assigned to the bank as collateral for a $400,000 loan from January 1 to August 31, 2020. The loan was repaid on September 1, 2020.
  8. The following was taken from within the G&A line:
    1. Charitable donations to the Humane Society $6,000
    2. Concert tickets given to suppliers as Holiday gifts $1,800
    3. Meals and entertainment incurred by Hayley while negotiating with suppliers $2,000
    4. Golf green fees while entertaining suppliers $1,000
    5. Two customer parties and one all-staff party (all parties cost the same) $12,000.
    6. Accounting fees for the bookkeeping $10,000
    7. Legal fees incurred on the purchase of equipment $1,000
    8. Legal and accounting fees incurred when negotiating a line of credit with the bank $4,000
    9. Depreciation of $45,000
    10. Interest on the loan and line of credit $5,500
    11. Interest on insufficient income tax installments $400
    12. Purchase of some light fixtures for the store; expensed due to small dollar amount $1,500
    13. Damages paid under a breach of contract lawsuit from a supplier
  9. HPS incurred $15,000 of leasehold improvements during the year for landscaping. This amount was added to the capital asset account.
  10. Last year, legal fees incurred to issue shares to Haley was $1,000.
  11. Required: - Calculate HPSs net income (loss) for tax purposes. Show all of your work. Begin with net income per the financial statements, and add back/deduct for items that have different treatment for tax purposes. - Comment briefly on why any amounts from the additional information were omitted from the calculation. - After calculating the total CCA available for HPS you correctly determined it was $50,000.