prob021 - 4,200 (e) utilities service connections, July 15,...

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Problem 2 1 (Past exam question: 34 minutes) (Text: Chs. 4, 5, 6) During its taxation year ended December 31, 2008, Firecracker Manufacturing Limited, a public corporation, constructed in Southern Ontario new manufacturing facilities which were financed by a $1,150,000 issue of bonds and $1,500,000 in preferred shares available on March 1, 2008. Land was purchased at a cost of $700,000 on April 1, 2008 and construction of the building began immediately on that date. The corporation moved into its new building on September 1, 2008, the day after construction was completed. Costs of construction for the new building totalled $1,850,000, not including any of the items below. The financial accounting records show that the following expenditures were made in respect of the property in 2008: (a) determination of appropriate location for building on land (soil testing) $ 3,000 (b) architectural and engineering plans 9,000 (c) property taxes @ $1,200 per month 10,800 (d) insurance on building @ $600 per month from June 1, 2008
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Unformatted text preview: 4,200 (e) utilities service connections, July 15, 2008 5,300 (f) landscaping costs 14,000 (g) moving costs 24,000 (h) maintenance cost for building from September 1, 2008 18,000 (i) semi-annual interest payment made September 30, 2008 @ 12% per annum on bonds 69,000 (j) mortgage insurance premium @ $600 per month from April 1, 2008 5,400 (k) semi-annual dividend payment made September 30, 2008 @ 8% per annum 28,000 (l) issue costs for bonds and preferred shares: (i) legal and accounting fees 21,000 (ii) commissions 80,000 (m) costs of obtaining articles of amendment to allow for issue of preferred shares 3,000 The financial accounting records, also, indicate amortization for financial accounting purposes in the following amounts: (i) amortization of bond discount 1,150 (ii) amortization of discount on preferred shares 3,000 Required : Page 1 Indicate the appropriate tax treatment of each of the expenditures and amortized amounts discussed. Page 2...
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This note was uploaded on 11/19/2010 for the course ACC 742 taught by Professor Sydor during the Spring '10 term at Ryerson.

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prob021 - 4,200 (e) utilities service connections, July 15,...

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