Questions

The income statement that has been prepared by Recon Ltd.s accountant for the current year ending July 30 is as follows:

Sales Revenue		750,000
Cost of Goods Sold		270,000
Gross Profit		480,000
Operating Expenses:
	Salaries and Wages	118,000
	Interest and Property taxes	22,000
	Amortization expense (see Note 1)	56,000
	Charitable donations	2,700
	Life Insurance (see Note 2)	6,600
	Meals and Entertainment (see Note 3)	31,000
	Repairs and Maintenance (see Note 4)	62,000
	Other operating expenses	62,000	360,300
Operating income		119,700
Other revenue and expenses
	Loss on sale of delivery vans	-56,000
	Interest revenue	3,300
	Gain on sale of shares (Note 5)	10,800
	Dividends from taxable Canadian corporations	7,200	-34,700
Income before taxes		85,000
	Income tax expense		6,750
Income after taxes		78,250

Note 1: Recons assets include:

	Cost	NBV	UCC
Land	350,000	375,000
Building	560,000	380,000	340,000
Furniture and equipment	325,000	117,000	97,150
Delivery vans	320,000	186,000	115,280

During the year, Recon decided it would most cost effective to rent delivery vans as necessary than own the vehicles. Proceeds of $123,500 were received on the sale of the vans. New equipment and furniture was purchased for $50,500.

Note 2: Recon carries a life insurance policy on the major shareholder to ensure the company can survive until personnel can be replaced or redeployed in the event of his death.

Note 3: Meals and Entertainment expense included $5,000 to sponsor local childrens sports teams. The remainder was spent while entertaining clients.

Note 4: $23,000 was spent to replace leaking windows. The balance was spent to install a sky light above the employee breakroom.

Note 5: Recon sold shares for proceeds of $22,000. The shares had an original cost of $13,500.

Note 6: Recon has $4,800 (from 1997) in their net capital loss pool, and a $12,700 (from 2007) balance in their non-capital loss carryover pool.

REQUIRED: Ignore the temporary provision allowing immediate expensing of assets on pages 276 to 278 of your textbook.

Assignment 1 Capital Cost Allowance Schedule (CCA):

Using an Excel workbook, prepare the CCA schedule in good form for Recon Ltd. You may use the vertical format as in the textbook:

CCA Schedule (Alternative to Schedule 8)

\begin{tabular}{|c|c|c|c|} \hline ITEM & CL% & CL_% & Notes \\ \hline \multicolumn{4}{|l|}{ UCC Beginning } \\ \hline \multicolumn{4}{|l|}{ (+) Additions } \\ \hline \multicolumn{4}{|l|}{ (-) Disposals } \\ \hline \multicolumn{4}{|l|}{ Net additions - disposals } \\ \hline \multicolumn{4}{|c|}{ (-) Half Year Rule or (+) Accll Adjustment } \\ \hline \multicolumn{4}{|l|}{ (=) UCC before CCA } \\ \hline \multicolumn{4}{|l|}{ Recapture } \\ \hline \multicolumn{4}{|l|}{ Terminal loss } \\ \hline \multicolumn{4}{|l|}{ Max CCA permitted } \\ \hline \multicolumn{4}{|l|}{ (-) CCA Deduction } \\ \hline \multicolumn{4}{|l|}{\begin{tabular}{l} (+) Half Year Rule or (-) Accll \\ Adjustment \end{tabular}} \\ \hline (=) UCC Beginning next fiscal period & & & \\ \hline \end{tabular}