Question
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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