Assignment 2 is in accordance with Modules 5 and 6 and ought to be performed at the discontinue of Module 6. To solidify your thought of the disclose material of the two modules lined, be obvious to total the self-test questions space out in the modules’ project checklists earlier than you launch the project.
Directions
Read the following data after which answer the related questions. Whereas you happen to’ve got direct finishing this project, return and carefully evaluate the assigned subject cloth all over again.
Ask 2 ( 30 Marks)
For the taxation year ending December 31, 2023, the income assertion of Markham Ltd. used to be as follows:
Revenues $973,000
Charges:
Tag of Goods Offered ($272,000)
Selling and Administrative Charges (132,000)
Amortization Expense (156,000)
Other Charges (137,000) (697,000)
Earnings earlier than Earnings Tax Expense $276,000
Earnings Tax Expense:
Present ($ 97,000)
Future (32,000) (129,000)
2023 Score Accounting Earnings $147,000
Other Recordsdata:
1. The Company spent $6,000 throughout the year on landscaping for its current building. For accounting functions, this used to be handled as an asset. The Company will now not amortize this steadiness as it believes the work has an enormous life.
2. Selling and Administrative prices embody $15,000 in trade meals and entertainment.
3. Selling and Administrative prices embody membership prices for several employees in a local golf and country membership. These prices whole $3,400.
4. Other Charges incorporated donations to registered charities of $3,700.
5. Other Charges incorporated bond low cost amortization of $2,500.
6. In 2023, Markham Ltd. purchased a competing trade at a value that incorporated goodwill of $70,000. For accounting functions, there used to be no impairment or write-down of the goodwill since its enjoy.
7. Because the Company anticipated to direct more shares in 2024, it made several amendments to its articles of incorporation in 2023. Upright prices, incorporated in Other Charges, totaled $6,000.
8. On January 1, 2023, the Company had UCC balances for the following classes of depreciable property:
Class 1 $400,000
Class 8 575,000
Class 10 forty five,000
Class 13 68,000
The Class 1 steadiness related to a single building got in 2003 at a value of $550,000. It used to be estimated that the value of the land at the present used to be $50,000 and the building $500,000. On February 1, 2023, the building used to be offered for $612,000. It used to be estimated that the value of the land used to be unchanged at $50,000 and that the value of the building used to be $562,000. For accounting functions, the carrying value of the property used to be $507,000: $457,000 for the building and $50,000 for the land. The ensuing develop on the building used to be incorporated in the accounting revenues. The usual building used to be changed on February 15, 2023, with a brand current building got at a value of $683,000, of which $60,000 used to be for the land and $623,000 for the building. The Company chose no longer to elect a separate Class 1 so it did no longer qualify for the 6% CCA charge. No elections had been made with respect to the replacement of the building.
There had been no inclinations of any Class 8 property in 2023 however there had been purchases of Class 8 property of $126,000.
Because the Company had determined to rent all of its vehicles sooner or later, all of the Class 10 properties had been offered throughout the year. The capital value of the properties offered used to be $93,000 and the sale proceeds had been $37,000. The carrying value for accounting functions used to be $52,000 and the ensuing accounting lack of $15,000 ($37,000 – $52,000) used to be incorporated in Other Charges.
The Class 13 steadiness related to a single rent that commenced on January 1, 2021. The rent had an preliminary time duration of seven years, with two successive alternate choices to renew for three years each and each. Expenditures on this leasehold had been $50,000 in 2021 and $27,000 in 2022. There had been no additional expenditures in 2023. The write-off of those expenditures for accounting functions used to be incorporated in Amortization Expense.
9. Other Charges incorporated pastime on gradual income tax instalments of $500 and on gradual municipal tax payments of $275.
10. Markham Ltd. claimed the utmost CCA in per annum.
Required: Resolve Markham Ltd.’s 2023 uncover income. As successfully as, calculate the January 1, 2024 UCC for each and each CCA class. Ignore instantaneous expensing and any GST/HST and PST concerns.
Ask 3 ( 20 Marks)
Carol Basque is an experienced lawyer who carried on a trade as a sole proprietor. She carried on the trade out of a brand current building which she purchased several years previously for $725,000, with $175,000 paid for the land and $550,000 for the building. The building used to be venerable completely for trade functions, and an election used to be filed to embody it in a separate Class 1. The UCC on January 1, 2023 used to be $447,831.
As her note specialized in cases the build lack of madden administration had precipitated steady difficulties, she has had to interchange her position of enterprise furnishings several times. Basically the most recent used to be in 2023, when the divorcing house owners of a martial arts membership may possibly no longer arrive to a accrued resolution on an equitable split of family sources. A registered charity, Ex-Cons R Us, hauled her destroyed furnishings away. No insurance protection or other amounts had been got with respect to the injury.
The usual furnishings had a capital value of $Fifty three,000 and the current furnishings used to be purchased for $78,000. The January 1, 2023 Class 8 UCC used to be $38,160.
In January 2021, Carol got a $92,000 Lexus that she venerable largely for trade functions. In 2023, she had concluded that, given the character of her clientele, this automobile looked too luxurious. Basically based fully on this survey, she traded the Lexus for a $28,000 Toyota automobile. The January 1, 2023 UCC for the Lexus used to be $17,850. Neither of the cars had been zero-emission vehicles.
For the explanation that Lexus had been badly damaged by an existing client who lost his case, the trade-in allowance that she got used to be only $22,000. In 2023, the Toyota used to be driven 41,000 kilometers, with 38,000 driven for trade functions and only 3,000 for private consume. The operating prices for the year had been $6,150. Mediate that the operating prices for the Lexus had been accurately calculated and incorporated in the accounting prices.
Other 2023 purchases embody the following:
New Computer $ 1,250
Functions Instrument 1,475
Client List from retiring lawyer 32,000
Other 2023 trade prices, particular on an accrual basis, embody the following:
Building recent prices $27,300
Funds to Assistants (Trace*) 46,100
Miscellaneous Space of enterprise Charges 13,600
Meals with Customers (no longer billed to prospects) 15,500
*Trace: The payments embody $25,000 paid to her 17-year-standard daughter. The daughter worked share time throughout the college year and full time throughout the summer season, doing online research for Carol’s note. The prices paid to the daughter had been thought about cheap (ITA 67).
In 2023, trade revenues had been $297,800.
Required: Calculate the 2023 trade income. In preparing your solution, ignore instantaneous expensing, CPP points, and any GST/HST and PST concerns.
Ask 4 (15 Marks)
Case A: Existing two differences between the income tax therapy of trade income and property income.
Case B: Temporarily characterize the “disappearing source” rule.
Case C: Every condominium property that’s owned by a person that has a value more than $50,000 is added to a separate Class. What’s the explanation of this separate class therapy?
Case D: Eddy Edwards financed the enjoy of an income producing property. The price of the property used to be $435,000 and Eddy financed 100% of the enjoy. The funding proved worthwhile, with the property being offered for $610,000. He venerable the sale proceeds to gain two properties with prices of $495,000 and $115,000 respectively. Is the pastime expense on the unique mortgage silent deductible and if yes, how does this happen?
Case E: Betty Bond borrows $220,000 to gain an income producing property. The outcomes from this funding had been no longer promising and, as a result, she offered the funding for $150,000. She venerable these funds to gain two properties. The first property value $35,000, whereas the 2d property value $115,000. How will the $220,000 in borrowing be traced to the two properties?
Ask 5 (20 Marks)
Mr. Taylor offered a pleasing triplex on February 1, 2022 for a whole value of $345,000. Of this amount, it used to be estimated that $255,000 used to be attributable to the building and $90,000 to the land. The three condominium units in the triplex had been identical in dimension and aspects and, for functions of allocation to a CCA class, the property used to be a single property.
At a financial kill sale in February 2022, Mr. Taylor purchased furnishings and appliances for one of many units at a whole value of $12,800.
Early in February 2022, all three units had been rented. In 2022, Mr. Taylor’s triplex generated rents of $36,000 and incurred prices, rather than CCA, of $10,900.
In Could furthermore of 2023, the tenants in the furnished unit moved out and purchased the complete furnishings and appliances from Mr. Taylor for $7,840. In 2023, Mr. Taylor’s triplex generated rents of $28,400 and incurred prices, rather than CCA, of $18,180.
Mr. Taylor claims the utmost CCA allowable in each and each 2022 and 2023.
Required: Calculate the condominium income for each and each of 2022 and 2023. Also, settle the UCC balances on January 1, 2024. Consist of in your solution any income tax consequences related to the sale of the furnishings and appliances. Ignore instantaneous expensing.
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