Chapter 5 assigned problems

# Chapter 5 assigned problems - CHAPTER FIVE SOLUTIONS...

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CHAPTER FIVE SOLUTIONS Solution to Assignment Problem Five - 1 Case A In this Case, the taxable benefit would be calculated as follows: Standby Charge [(2%)(\$30,000)(12)(7,200/20,004)] \$2,591 Operating Cost Benefit - Lesser Of: [(7,200)(\$0.22)] = \$1,584 [(1/2)(\$2,591)] = \$1,296 1,296 Total Benefit \$3,887 As Mr. Stickler’s usage is more than 50 percent employment related, he can use the one-half the standby charge as his operating cost benefit. Case B In this Case, the taxable benefit would be calculated as follows: Standby Charge [(2%)(\$30,000)(10)(15,000/16,670)] \$5,399 Operating Cost Benefit - Lesser Of: [(15,000)(\$0.22)] = \$3,300 [(1/2)(\$5,399)] = \$2,700 2,700 Total Benefit \$8,099 As Mr. Stickler’s usage is more than 50 percent employment related, he can use the one-half the standby charge as his operating cost benefit. Case C In this Case, the taxable benefit would be calculated as follows: Standby Charge [(2%)(\$30,000)(6)] \$3,600 Operating Cost Benefit [(25,200)(\$0.22)] 5,544 Total Benefit \$9,144 In this Case, one-half of the standby charge would be less than the regular operating cost benefit. However, Mr. Stickler cannot elect to use this calculation as not more than 50 percent of his usage is employment related.

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Solution to Assignment Problem Five - 2 Automobile Benefit The standby charge on the car will be based on the cost of the car, including provincial sales tax and GST. As the car is driven more than 50 percent for employment related purposes, the reduced standby charge is equal to \$7,181 [(2%)(\$39,900)(12)(15,000/20,004)]. The operating cost benefit on the car is \$3,300 [(15,000)(\$0.22)]. While Mr. DiSalvo could use the alternative calculation based on 50 percent of the standby charge, the result would be a higher taxable benefit. Life Insurance Benefit The cost of group term life insurance must be treated as a taxable benefit by the recipient employee. This results in a life insurance benefit of \$4,000. As life insurance is an exempt supply, there is no GST benefit. Television Set Benefit Since the cost of the award is greater than \$500, the taxable benefit on the television set would be the cost, including provincial sales tax and GST, of \$9,120. Total Benefit The taxable benefits, including GST, for Mr. DiSalvo total \$23,601 (\$7,181 + \$3,300 + \$4,000 + \$9,120).
Solution to Assignment Problem Five - 3 With respect to Cars B and C, employment related usage was more than 50 percent of total usage and, as a consequence, there is an available reduction in the standby charge, as well as an alternative calculation of the operating cost benefit. For Car A, the employment related use is less than 50 percent and, as a consequence, there is no alternative calculation of either the standby charge or the operating cost benefit. Car A

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## This note was uploaded on 06/17/2008 for the course ACCT 321 taught by Professor Smith during the Spring '08 term at University of Calgary.

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Chapter 5 assigned problems - CHAPTER FIVE SOLUTIONS...

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