Chapter15solutions

Chapter15solutions - CHAPTER 15 Solution 1 Effect on Income...

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Unformatted text preview: CHAPTER 15 Solution 1 Effect on Income Investments: ACL 1 / 2 × ($22,000 – ($60,000 + $500))................................................................ $ (19,250) Land: TCG 1 / 2 × ($200,000 – ($40,000 + $10,000)) .................................................................... 75,000 Building: TCG 1 / 2 × ($125,000 – ($70,000 + $6,000)) ................................................................ 24,500 Building: recapture ($45,000 – $70,000)..................................................................................... 25,000 Equipment: recapture (($8,000 – $400) – nil).............................................................................. 7,600 Eligible capital property: goodwill and customer lists: Proceeds ( 3 / 4 × (60K + 35K)) ........................................................................ $ 71,250 Less: CEC balance ........................................................................................ 16,000 $ 55,250 Previous CECA claims (( 3 / 4 × $40,000) – $16,000)...................................... 14,000 $ 41,250 Income ( 2 / 3 × $41,250) .................................................................................. 27,500 Income (recapture of CECA) ........................................................................ 14,000 41,500 Income effect ............................................................................................................................... $ 154,350 Capital Dividend Account Balance: January 1, 2007............................................................................................................. Nil Investments: 1 / 2 × ($22,000 – ($60,000 + $500))......................................................................... $ (19,250) Land: 1 / 2 × ($200,000 – ($40,000 + $10,000) .............................................................................. 75,000 Building: 1 / 2 × ($125,000 – ($70,000 + $6,000)) ......................................................................... 24,500 Eligible capital property: goodwill and customer lists: 2 / 3 × $41,250 27,500 Balance: December 31, 2007 ....................................................................................................... $ 107,750 The above can be summarized in tabular form as follows: Capital dividend account Income effect Asset ABI AII Untaxed fraction of net cap. gains Capital dividend received Untaxed fraction of net gain on ECP Untaxed life ins. proceeds Capital dividend paid Balance Investments.... $ (19,250) $ (19,250) $ (19,250) Land............... 75,000 75,000 75,000 Building ......... $ 25,000 24,500 24,500 24,500 Equipment...... 7,600 ECP................ 41,500 $ 27,500 27,500 $ 74,100 $ 80,250 $ 80,250 Nil $ 27,500 Nil Nil $ 107,750 Solution 2 Capital dividend account 1986 Disposal of bonds: $10,000 capital gain × 1 / 2 ............................................................. $ 5,000 1988 Received capital dividend........................................................................................... Received capital dividend....
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This note was uploaded on 09/30/2008 for the course ACCT 360 taught by Professor Jones during the Summer '08 term at Windsor.

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Chapter15solutions - CHAPTER 15 Solution 1 Effect on Income...

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