Question
Joan's Party Planners Limited provides start-to-finish party planning services for all occasions. A summarized set of financial statements for the taxation year ended December 31,
Joan's Party Planners Limited provides start-to-finish party planning services for all occasions. A summarized set of financial statements for the taxation year ended December 31, 2020 are set out below:
Joan's Party Planners Limited
STATEMENT OF INCOME
For the year ended December 31, 2020
Revenues....................................................................................................... | $561,000 | |
Expenses: General and administrative......................... | $411,930 |
|
Amortization on fixed assets.......................................... | 28,170 | 440,100 |
|
| 120,900 |
Gain on disposal of fixed assets (see details below)............................. | 79,100 | |
Net income before income taxes............................................................... | 200,000 | |
Provision for income taxes........................................................................ | 43,240 | |
Net income after income taxes.................................................................. | $156,760 |
Additional information related to 2020 is provided below.
The opening UCC balances as at January 1, 2020 were as follows:
Class 1......................................................................... | $30,000 |
Class 6......................................................................... | 2,100 |
Class 8......................................................................... | 2,000 |
Class 10....................................................................... | 11,000 |
Class 12....................................................................... | Nil |
During 2020, Joan's Party Planners Limited purchased the following depreciable assets:
Office furniture..................................................................................................... | $15,000 |
Delivery van.......................................................................................................... | 30,000 |
Computer equipment & related systems software (October 2020)............. | 10,000 |
Computer word processing software................................................................ | 6,000 |
Cutlery and dishes................................................................................................ | 21,000 |
Kitchen utensils (less than $200 each)............................................................. | 1,000 |
Photocopy machine............................................................................................. | 2,600 |
In April 2020, Joan's Party Planners Limited sold their owned business premises (consisting of land and a Class 1 building) and moved to a more suitable location, which is currently being rented. They received proceeds of $20,000 for the land (original cost of $5,000). The Class 6 asset mentioned above is the fence that was erected around these former business premises. On the sale of these premises, no proceeds were allocated to the fence. This was the only asset in Class 6.
The details of the sale of the former Class 1 building, as well as the other depreciable assets sold during 2020, are set out below:
| Proceeds | Original Cost | Net book value |
Cl 1 building | 125,000 | 45,000 | 40,000 |
Chairs and tables (Class 8) | 6,000 | 8,000 | 5,120 |
Delivery van | 4,500 | 18,000 | 6,175 |
Office equipment | 5,000 | 15,000 | 4,915 |
Table linens | 3,000 | 25,000 | 8,190 |
During 2020, Joan's Party Planner Limited purchased the client list from a competitor who was going out of business. They paid $12,000 for this list which had an indefinite life.
Required:
Using the templates provided, calculate the corporation's minimum income from business for the year ended December 31, 2020. Assume all expenses are reasonable in the circumstances.
Ensure you complete the template for CCA as well. You are required to calculate the CCA amount, plus the closing UCC.
Support your treatment of each item listed above with an appropriate reference
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started