Part Vi Business Operation (25 Marks) Mr. Anholt also operated a sole proprietorship business for the fiscal year ended December 31, 2017. Sales Less: Cost of Goods Sold Gross Profit Less: Selling Expenses Less: General Admin Expenses Income Before Taxes Less: Provision for Income Taxes Net Income Anholt Asset Sales Income Statement January 1 to December 31, 2017 $419,000 $240,000 $179,000 $81,000 $68,000 149,000 30,000 $6,000 $24,000 Based on your discussion with the client, you have obtained the following information, all of which have been reflected in the above financial statement: a) Country club membership fees were paid for Mr. Anholt who used the club regularly to close sales. The annual fees were: $2,300 b) Mr. Anholt incurred expenses related to enternainment meals with clients during the year in the amount of: $3,600 Sales manager bonuses of $10,000 were accrued at December 31, 2017. $7,000 of the bonuses were paid on February 15, 2018 and the remaining was paid March 15, 2018 d) During the year the business borrowed money to buy new equipment. The interest related to this was $15,000. e) Instead of borrowing more money at the bank, the business decided to pay their GST late. This resulted in an interest charge from Canada Revenue Agency (CRA) in the amount of $2,200 A life insurance policy was taken out on the Mr. Anholt's life. Life insurance premiums on this policy amounted to $2,500. The insurance was a requirement of obtaining financing from a financial institution and is payable to the lender in the event of death B) Accounting Depreciation Expense on the fixed assets was $24,700 h) Although not in accordance with GAAP, the Administration expense includes landscaping expenses for Mr. Anholt's personal residence in the amount of $1,400 Part VI: Continued 1) The business sold inventory on installment in January 2017. The sales price was $40,000 and the cost of goods sold was $25,000. The $40,000 accounts receivable will require payments of $20,000 on June, 2018; $10,000 on June, 2019 and $10,000 on June, 2020. i) The following information was taken from the selling expenses: a) Baseball game tickets given to clients $6,500 b) Christmas party for all staff (cost is considered reasonable) $6,300 k) The following information has been provided regarding the assets owned/leased by the business, Prepare a Capital Cost Allowance schedule for each asset and determine the amount of CCA that may be claimed by the business Accounting Records Tax Records Type of Asset Cost Net Book Class (%) UCC Beg Value Brick Building $150,000 $30,000 1(4%) $75,000 Equipment 75.000 45,000 8 (20%) 521,000 Truck 17,500 10,000 10 (30%) $7,800 Government License (Uniimited Life) 15,000 90,000 14.1 $9,440 Rolled over Previous Years CEC Pool into Beginning Balance for Class 14.1 During 2017 the company made the following additions: 1. Mr. Anholt leased a warehouse on January 1, 2017 for a 2 year period with an option to renew it for another 2 years. Renovations were done immediately and cost: $12,200 2. Equipment purchased for $3,900 3. Luxury car was purchased by the company for: $83,000 (for simplicity ignore GST & PST) During 2017 the company disposed of the following assets: Proceeds Capital Cost Brick Building $106.000 $150,000 Equipment $2,300 2,500 Truck $5,000 17,500 ** The only asset in Class REQUIRED 1. Using the Reconciliation Method determine the Net Business income to be reported on the T1 2. Prepare a complete CCA schedule for each class 3. Show and submit all calculations 4. Record the Net Business Income you have calculated on the appropriate line on the Part Vi Business Operation (25 Marks) Mr. Anholt also operated a sole proprietorship business for the fiscal year ended December 31, 2017. Sales Less: Cost of Goods Sold Gross Profit Less: Selling Expenses Less: General Admin Expenses Income Before Taxes Less: Provision for Income Taxes Net Income Anholt Asset Sales Income Statement January 1 to December 31, 2017 $419,000 $240,000 $179,000 $81,000 $68,000 149,000 30,000 $6,000 $24,000 Based on your discussion with the client, you have obtained the following information, all of which have been reflected in the above financial statement: a) Country club membership fees were paid for Mr. Anholt who used the club regularly to close sales. The annual fees were: $2,300 b) Mr. Anholt incurred expenses related to enternainment meals with clients during the year in the amount of: $3,600 Sales manager bonuses of $10,000 were accrued at December 31, 2017. $7,000 of the bonuses were paid on February 15, 2018 and the remaining was paid March 15, 2018 d) During the year the business borrowed money to buy new equipment. The interest related to this was $15,000. e) Instead of borrowing more money at the bank, the business decided to pay their GST late. This resulted in an interest charge from Canada Revenue Agency (CRA) in the amount of $2,200 A life insurance policy was taken out on the Mr. Anholt's life. Life insurance premiums on this policy amounted to $2,500. The insurance was a requirement of obtaining financing from a financial institution and is payable to the lender in the event of death B) Accounting Depreciation Expense on the fixed assets was $24,700 h) Although not in accordance with GAAP, the Administration expense includes landscaping expenses for Mr. Anholt's personal residence in the amount of $1,400 Part VI: Continued 1) The business sold inventory on installment in January 2017. The sales price was $40,000 and the cost of goods sold was $25,000. The $40,000 accounts receivable will require payments of $20,000 on June, 2018; $10,000 on June, 2019 and $10,000 on June, 2020. i) The following information was taken from the selling expenses: a) Baseball game tickets given to clients $6,500 b) Christmas party for all staff (cost is considered reasonable) $6,300 k) The following information has been provided regarding the assets owned/leased by the business, Prepare a Capital Cost Allowance schedule for each asset and determine the amount of CCA that may be claimed by the business Accounting Records Tax Records Type of Asset Cost Net Book Class (%) UCC Beg Value Brick Building $150,000 $30,000 1(4%) $75,000 Equipment 75.000 45,000 8 (20%) 521,000 Truck 17,500 10,000 10 (30%) $7,800 Government License (Uniimited Life) 15,000 90,000 14.1 $9,440 Rolled over Previous Years CEC Pool into Beginning Balance for Class 14.1 During 2017 the company made the following additions: 1. Mr. Anholt leased a warehouse on January 1, 2017 for a 2 year period with an option to renew it for another 2 years. Renovations were done immediately and cost: $12,200 2. Equipment purchased for $3,900 3. Luxury car was purchased by the company for: $83,000 (for simplicity ignore GST & PST) During 2017 the company disposed of the following assets: Proceeds Capital Cost Brick Building $106.000 $150,000 Equipment $2,300 2,500 Truck $5,000 17,500 ** The only asset in Class REQUIRED 1. Using the Reconciliation Method determine the Net Business income to be reported on the T1 2. Prepare a complete CCA schedule for each class 3. Show and submit all calculations 4. Record the Net Business Income you have calculated on the appropriate line on the