Question

Your client, Mr. X began a self-employed, unincorporated coffee business 123 Ltd. Mr. X would like...

Your client, Mr. X began a self-employed, unincorporated coffee business 123 Ltd. Mr. X would like some assistance in preparing his 2020 tax return. You have been provided with the following information:

123 Ltd.
Statement of Income
For the year ended December 31, 2020
Revenue $                78,000
Less: cost of goods sold $                 25,450
Gross profit $               103,450
Expenses:
Travel - meals $                    1,750
Travel - accommodation $                   4,400
Trave - total operating expenses - car (note a) $                   4,500
Sales manager's convention $                    1,100
Salaries paid to staff $                58,000
Health club due $                   1,500
Child care and housekeeping expenses (nanny - single parent) (note b) $                 10,500
Home office expenses (note e) $                       990
Telephone bills $                        115
Office supplies $                    1,650
Entertainment - drinks and meals $                   2,400
Private dental plan - for staff members $                   2,350
Restaurant structural renovation costs (note d) $                 12,500
Straight-line amortization $                   3,600
$               105,355
Accounting business loss before tax $                  (1,905)
You have been provided with the following supplemental info:
Note a: Mr. X used his personal automobile for all his business travel. The amount represents his total expenses for the 12-month period.
His travel log included business mileage of:
Business mileage: 16,000 km
Total kilometers: 23,000 km
Note b: Mr. X would like to deduct all of his nanny expenses against his income as he needed to incur them to concentrate on the business.
Note c: There are no unrecorded revenues. However, Mr. X believes a portion of the AR balance is uncollectible (as a customer has recently declared banktruptcy).
Mr. X did not provide for this bad debt expense in his financial statements.
The total portion of the AR balance that is uncollectible is: $650
Note d: The structural renovation of the coffee shop included new walls, flooring, an office for Mr X. and a kitchen.
Note e: To ease the burden of being a single parent, Mr. X set up a home office. He uses the office to complete his administration work in the evenings.
The home office expenses relate to a proportion of heat, light and power.

Given the income statement above, Mr. X has asked you to make the necessary adjustments to calculate the company's income from a business for tax purposes (Division B business income).

For note e (home office) and other expenses (bad debt expense), the following expenses should be adjusted:

Homework Answers

Answer #1
Calculation of Net Income $ $
Accounting Loss before Tax -1905
Add Expenses disallowed for tax purposes
Travel - Meals and Accomodation 6150
Trave - Operating Expenses Car (personal use) 1369.57
Health Club fee due 1500
Child Care and housekeeping expenses 10500
Entertainment - Drinks and meals 2400
Restaurant Structural renovations - Capital Expenditure 12500
Straight Line Amortization (as capital allowances are claimed for tax purposes) 3600
39780.43
Total Net Income for tax purposes 36114.57
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant...
Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund. The following information...
Note: This problem is for the 2018 tax year. David R. and Ella M. Cole (ages...
Note: This problem is for the 2018 tax year. David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant specializing in retail management, and Ella is a dental hygienist for a chain of dental clinics. David earned consulting fees of $145,000 in 2018. He maintains his own office and pays for all business expenses. The Coles are adequately covered by the...
Develop a 2018 individual tax return (with all required forms and supporting schedules) for Rob and...
Develop a 2018 individual tax return (with all required forms and supporting schedules) for Rob and Laura Petrie that is both professional in appearance and technically correct. The use of tax software or a professional tax preparer to complete this project is prohibited. You can access fill-in forms (in pdf format) on the IRS website (www.irs.gov) by clicking on “More” on the left side of the homepage in the “Forms and Pubs” section. Next, click on the “Current Forms and...
Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant...
Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund. The following information...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...