Chapter14Solutions

Chapter14Solutions - Chapter 14 Solution 2 Part(A The...

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Chapter 14 - Solution 2 Part (A) The alternatives available to Ruffle Limited are as follows: (1) 1 / 12 of the estimated tax liability for the current year (2008) [spar. 157(1)( a )(i)]: 1 / 12 × $45,000 = $3,750.00 (2) 1 / 12 of the instalment base which is defined in Regulation 5301 and which is essentially the tax payable for the immediately preceding taxation year (i.e., 2007) [spar. 157(1)( a )(ii)]: 1 / 12 × $69,036 = $5,753.00 (3) 1 / 12 of the instalment base for the second preceding taxation year for the first two months, then 1 / 10 of the instalment base for the immediately preceding taxation year net of the amount paid in instalments for the first two months [spar. 157(1)( a )(iii)]: (a) two instalments of $4,502.00 ( 1 / 12 × $54,024); (b) ten instalments of $6,003.20 ( 1 / 10 × [$69,036 – (2 × $4,502)]). In Ruffle’s situation, Alternative 1 results in the least amount to be paid each month during the year. However, if the total of the instalment payments is less than the actual tax payable and the amount of tax that would have been paid under Alternatives 2 and 3, Ruffle Limited will be subject to interest charges. Part (B) Ruffle’s instalment payments were based on the 2008 estimated tax liability; assuming the 2008 liability is not greater than $45,000, a payment of $2,491.92 (based on the calculations below) will be required to be made to stop further interest charges. Opening balance Instalments required Instalments made Closing balance Nov. 30/07. ........................................................ Nil $ 3,750 $ 3,750 Nil Dec. 31/07 . ........................................................ Nil 3,750 3,750 Nil Jan. 31/08. .......................................................... Nil 3,750 3,750 Nil Feb. 28/08. ......................................................... Nil 3,750 3,750 Nil Mar. 31/08 . ........................................................ Nil 3,750 3,750 Nil Apr. 30/08. ......................................................... Nil 3,750 3,750 Nil May 31/08. ......................................................... Nil 3,750 3,750 Nil Jun. 30/08 . ......................................................... Nil 3,750 2,700 $ 1,050.00 Jul. 31/08 . .......................................................... $1,056.26 (1) 3,750 2,700 2,106.26 Aug. 31/08. ........................................................ 2,118.82 (2) 3,750 2,700 3,168.82 Sep. 30/08. ......................................................... 3,187.10 (3) 3,750 3,750 3,187.10 Oct. 31/08. ......................................................... 3,208.83 (4) 3,750 4,500 2,458.83 Dec. 31/08 . ........................................................ 2,491.92 (5) 2,491.92 Nil (6) $ 45,000 $ 45,091.92 NOTES TO SOLUTION (1) July 1–July 31 (31 days): $1,050 × (1 + .07/365) 31 (2) Aug. 1–Aug. 31 (31 days): $2,106.26 × (1 + .07/365) 31 (3) Sept. 1–Sept. 30 (30 days): $3,168.82 × (1 + .07/365) 30 (4) Oct. 1–Oct. 31 (31 days): $3,187.10
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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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Chapter14Solutions - Chapter 14 Solution 2 Part(A The...

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