Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On July 1, 2020, Molly Malone started her own business on as a self-employed salesperson. (By the way, there are 184 days from July 1

On July 1, 2020, Molly Malone started her own business on as a self-employed salesperson. (By the way, there are 184 days from July 1 to December 31.) Mollys business is HST registered. The following information relates to her revenue and expenditures from July 1, 2020 to December 31, 2020 and the HST received/paid is not included in these amounts: a) Total commissions she received in 2020 was $ 55,000. Of the commissions owing to her as at December 31, 2020, Molly estimated that one account will be uncollectible in the amount of $500.

b) Molly paid her husband Frank, for bookkeeping services at an inflated rate of $40 per hour, for a total salary of $45,000 (based on 1,125 hours of service). The market rate for the hourly wage of bookkeeper services in 2020 was $20 per hour.

c) On July 1, 2020, Molly purchased a vehicle at a cost of $40,000. This amount includes the HST. Molly has determined that the car is used 80% for business use and expects that this percentage will vary from year to year. The total interest paid on the loan to purchase the vehicle was $1,600 for the period of July 1 to December 31.

d) Cost of computer purchased in July 2020 was $2,500. Molly has estimated that the computer is used 75% for business use. The cost of the accounting software package also purchased in July 2020, was $800 and Molly would use this 100% for business purposes. Molly also acquired office furniture in July 2020 at a cost $ 1,000.

e) On November 30, 2020, Molly decided to downgrade her automobile and sold the car referred to in part (c) above for proceeds of $20,000. On December 1, 2020 she purchased another vehicle at a cost of $18,000. This amount excludes HST and the business use was still 80% and expects that this percentage will vary from year to year. Molly paid cash for this vehicle.

f) Molly incurred the following automobile and travel costs: Vehicle operating costs $ 1,500 (these are the TOTAL costs incurred from July 1, 2020 to December 31, 2020) Accommodations 1,000 Meals 800

g) Molly attended 3 conventions during the first six months of her business. The costs were as follows: Convention 1 (includes $140 for meals) $ 600 Convention 2 400 no cost allocation available for meals the convention lasted for 2 days Convention 3 (includes $50 for meals) 200

h) Molly conducted the business out of her house. She has set aside office space, which occupies approximately 10% of the total square footage of the house. The total house expenditures for the twelve months of 2020 were as follows: Mortgage -principal $ 4,400 -interest 8,000 Insurance 495 Repairs and maintenance 600 Municipal taxes 2,100 Utilities 750 Heat and hydro 1,680 Her friend Mary gave her some very good advice, and Molly has decided not to claim CCA on her house.

i) Additional information about costs incurred are as follows: Cost of office supplies used was $650. Cost of business telephone line $1,600 Tennis club membership dues were $ 950.

Required: Using proper income statement format, prepare a Statement of Income from Selfemployment and CCA Schedule for the year ended December 31, 2020, to be filed by Molly Malone with her 2020 personal income tax return. Be sure to include organized, detailed calculations and notes in your supporting documentation.

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

Step: 3

blur-text-image

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

Managerial Finance In A Canadian Setting

Authors: X. Lusztig, X. Schwab

4th Edition

0409806021, 1483106330, 9780409806021, 9781483106335

More Books

Students also viewed these Finance questions

Question

Family basic steps to socialization write a short note ?

Answered: 1 week ago

Question

What does physics deal with?

Answered: 1 week ago

Question

Enumerate the qualities of a salesman.

Answered: 1 week ago