Olivia Smith carries on a landscaping business as a sole proprietor. The business began opera- tions...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Olivia Smith carries on a landscaping business as a sole proprietor. The business began opera- tions on January 2, 2021, and has a December 31 year end. The 2021 and 2022 results for the business can be described as follows: 2021 During its first year, the business had sales of delivered merchandise and services totalling $185,000. Of this total, $65,000 are shown as accounts receivable on December 31, 2021. Olivia anticipates that $5,000 of the receivables are doubtful of collection. In addition to these sales of delivered merchandise and services, she received $23,000 in advances for merchandise to be delivered in 2022. Olivia purchased a large supply of landscaping materials from the trustee of a bankrupt landscaping business at a very good price. Since she is unlikely to use them in the next few years, she has arranged to sell these materials for $50,000. The sale takes place in September 2021. These materials have a cost of $40,000, resulting in a total gross profit of $10,000. Because of the size of this sale, she has agreed to accept a down payment of $30,000, followed by two annual instalments of $10,000. The instalments are due on December 31, 2022, and December 31, 2023. 2022 During 2022, $5,500 of accounts receivable were determined to be bad and were written off. All of the merchandise for which advances had been received was delivered and the $10,000 instalment on the 2021 sale of landscaping materials was received. Sales of delivered merchandise and services totalled $240,000. Of this total, $50,000 are shown as accounts receivables at December 31, 2021. Olivia anticipates that $3,500 of this amount will be doubtful of collection. In addition to the 2022 sales of delivered merchandise and services, she receives $13,400 in advances for merchandise to be delivered in 2023. Required: How would the preceding information affect the calculation of Olivia Smith's busi- ness income for the 2021 and 2022 taxation years? Include the full details of your calculations, not just the net result for each year. Olivia Smith carries on a landscaping business as a sole proprietor. The business began opera- tions on January 2, 2021, and has a December 31 year end. The 2021 and 2022 results for the business can be described as follows: 2021 During its first year, the business had sales of delivered merchandise and services totalling $185,000. Of this total, $65,000 are shown as accounts receivable on December 31, 2021. Olivia anticipates that $5,000 of the receivables are doubtful of collection. In addition to these sales of delivered merchandise and services, she received $23,000 in advances for merchandise to be delivered in 2022. Olivia purchased a large supply of landscaping materials from the trustee of a bankrupt landscaping business at a very good price. Since she is unlikely to use them in the next few years, she has arranged to sell these materials for $50,000. The sale takes place in September 2021. These materials have a cost of $40,000, resulting in a total gross profit of $10,000. Because of the size of this sale, she has agreed to accept a down payment of $30,000, followed by two annual instalments of $10,000. The instalments are due on December 31, 2022, and December 31, 2023. 2022 During 2022, $5,500 of accounts receivable were determined to be bad and were written off. All of the merchandise for which advances had been received was delivered and the $10,000 instalment on the 2021 sale of landscaping materials was received. Sales of delivered merchandise and services totalled $240,000. Of this total, $50,000 are shown as accounts receivables at December 31, 2021. Olivia anticipates that $3,500 of this amount will be doubtful of collection. In addition to the 2022 sales of delivered merchandise and services, she receives $13,400 in advances for merchandise to be delivered in 2023. Required: How would the preceding information affect the calculation of Olivia Smith's busi- ness income for the 2021 and 2022 taxation years? Include the full details of your calculations, not just the net result for each year.
Expert Answer:
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
Students also viewed these accounting questions
-
1. Braun's Brakes manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: Which model has the...
-
Current Attempt in Progress Splish Brothers Inc. had the following transactions involving current assets and current liabilities during February 2022. Feb. 3 Collected accounts receivable of $15,300....
-
Olivia Smith is the owner of an unincorporated business that does landscaping. The business began operations on January 2, 2019 and has a December 31 year end. The 2019 and 2020 results for the...
-
Why is globalization of industries a common factor today?
-
The magnetic flux density within a bar of some material is 0.435 tesla at an H field of 3.44 105 A/m. Compute the following for this material: (a) The magnetic permeability. (b) The magnetic...
-
6. Discuss the nature and scope of operations management in terms of production decisions. 7. Explain the product selection and stages involved therein
-
What is the difference between augmented intelligence and autonomous intelligence?
-
Consider the following transactions of Pearl Software: Mar 31 Recorded cash sales of $180,000, plus sales tax of 8% collected for the state of Texas. Apr 6 Sent March sales tax to the state....
-
B Exercise 2 Dredd Company has begun a worksheet for preparing a statement of cash flows. The following additional information is provided: 1. Cash dividends of $8,000 were paid during the year. 2....
-
The o matrix is defined by: (i) Prove the relation Ox with A2+ = 1. 01 = - (11) eiad = I cos a + io sin a where I is the 2 x 2 unit matrix. (ii) Find an analogous relation for the matrix oy defined...
-
If you added a cell-cycle inhibitor to block proliferation to the presomitic mesoderm of a developing chick, what would happen to somitogenesis?
-
what differentiates a glycerophospholipid from a triacylycerol?
-
How do contemporary theories of social stratification explain the persistence of class hierarchies, and what mechanisms contribute to social mobility or the lack thereof in modern societies ?
-
The impact of social and digital media on marketing communications cannot be underestimated. Marketing executives and marketing managers are expected to develop strategies and craft campaigns that...
-
Please draft a short Diversity, Equity, Inclusion, and Access: (A.) Public Statement and (B.) Corporate policy to address the issues above. You may use internet search engines to gain ideas. Public...
-
Mia Co. uses the cost system. The next data resumes the related operations to August production: a.Materials bought on account, $660,000. b.Requisitioned materials, $577,500 dollars, from which...
-
Modify the counter from Exercise 5.44 such that the counter will either increment by 4 or load a new 32-bit value, D, on each clock edge, depending on a control signal Load. When Load = 1, the...
-
Your company continues to have the stinky job of processing halibut livers detailed in Problem 14.E1. Halibut arrive in batches on the fishing boats, so you decide to evaluate a continuous solvent...
-
Solve Problem 14.E2, part b, but do not assume \(R_{t}\) is constant. Derive an alternative for Eq. (13-29a) for nonconstant \(\mathrm{R}_{t}\) but with a constant amount of insoluble solids. Then...
-
Suppose we have a volume of nitrogen plus a small amount of water vapor at \(1.0 \mathrm{~atm}\). The walls of the container are at \(25^{\circ} \mathrm{C}\), and there is a hot pipe at \(105^{\circ}...
Study smarter with the SolutionInn App