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Question # 17 (12 marks) The following income statement was prepared for Dewey, Cheatem and How, a partnership comprised of three partners who share income

Question # 17 (12 marks)

The following income statement was prepared for Dewey, Cheatem and How, a partnership comprised of three partners who share income equally:

Dewey, Cheatem and How (A Partnership)

Income Statement

For the Year Ended December 31, 2020

Gross revenue $ 880,175

Expenses

Salaries and benefits staff 209,000

Office salaries 74,000

Rent 32,000

Office supplies 27,000

Client entertainment 5,000

Donations to charities 35,000

Salaries- partners 60,000

Depreciation 8,000

450,000

430,175

Gain on sale of securities 77,000

Dividend income from taxable Canadian companies 28,000

Capital dividends 5,000

110,000

Net income for accounting purposes $ 540,175

The adjusted cost base to Mr. Cheatem of his partnership interest was $ 55,792 at the beginning of the year. His drawings for the 2020 year were $ 77,500. The dividends were received from a CCPC all of whose income was eligible for the small business deduction. Available capital cost allowance for 2020 is $ 16,222.

REQUIRED: Insert your responses to each question in the spaces provided below:

(A) The following items from the above financial statement should be added to net income for accounting purposes to calculate net partnership income for tax purposes (add more items to the list below as needed).

Item Amount ($)

1.

2.

3.

(B) The following items from the above financial statement should be deducted from net income for accounting purposes to calculate net partnership income for tax purposes (add more items to the list below as needed).

Item Amount ($)

1.

2.

3.

(C) Calculate Mt. Cheatems share of income for tax purposes for 2020 (round to nearest whole dollar)

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