Problems Chapter 4
Problem 11
Source Renovations Ltd. specializes in home renovations and interior design in the Montreal area. Most
of the construction and finish carpentry work is subcontracted to self-employed contractors. The
following information rel
Chapter 5
Depreciable Property and Eligible
Capital Property
1
Capital Cost Allowance (CCA)System
ITA 18(1)(b) -Prohibits Deduction Of Capital Costs
ITA 20(1)(a)-Permits Deduction Of CCA
Types of capital property
Tangible assets
Intangible assets
Anoth
Chapter 11- Part 1
Computation of Taxable
Income of a Corporation
1
Incorporation vs. Individuals
NIFTP
Both begin with GAAP income and require
adjustments
No difference in deductions related to
business activities
Incorporation not allowed personal
su
Chapter 11-Part 2
Acquisition of Control
1
Meaning Of
Acquisition Of Control
Control: Ownership of shares that
carry the right to elect a majority of
the board of directors.
The acquisition of control is
considered to occur when control over
voting righ
Chapter 11-Part 3
Computation of Tax After
General Reductions for
Corporations
1
Types of Corporations
Canadian Corporation Resident in Canada
Public
[Ssec. 89(1)]
Publicly
listed
shares
Private
[Ssec. 89(1)]
Not
controlled
by
public
company
CCPC
[Ssec.
Solutions for Exercise 8
Deemed year end on June 30, 2015.
Step 1: Loss position as at Deemed year end.
Losses
B/F on Current
1/1/2015
Non-Cap Loss
Net -Cap Loss
Property loss
Total
Expires
130,000
10,000
12,000
2,000
14,000
5,500
5,500
19,500
Step 2; Det
CHAPTER 11
Computation of Taxable Income and Tax After
General Reductions for Corporations
Type 1 Problems
Solution 1: Taxable Income
2012
Par. 3(a)
54,000
42,500
96,500
11,000
(2,000)
$
105,500
ABIL.
(3,750)
Business loss.
n/a
Par. 3(e)
Income from Divis
Solutions for Chapter 5
Exercise
4
Class
Rate
SL/DB
UCC Beginning
Add:
Purchses
Less
Lessor of
POD
Cost
UCC before
adjustment
Net addition (Cannot
be negative)
1
4%
DB
120,000
8
20%
DB
75,000
10
30%
DB
40,000
13
SL
42,000
14
SL
54,400
10,000
100,000
150,0
Chapter 4
Solution 11: Schedule 1 Reconciliation
Net income before tax for accounting purposes
Add:
Unrecorded receivable (paragraph 12(1)(b)
Meals and entertainment ($10,400 50%) (subsection 67.1(1)
Charitable donations (paragraph 18(1)(a)
Club dues (par
Chapter 4
Income from Business:
General Concepts and Rules
1
Business Income
Income from a business in tax
Income means profit (after deduction of
expenses)-Sec. 9
What is income in accounting?
Profit =Income (Revenue)-Expenses
-Not consistent with the
Accounting for the investment
The choice of the appropriate method to account for the Queen investment depends primarily
on whether King has significant influence over Queen. The following factors indicate that King
does have significant influence:
King's
Lecture notes fair value and goodwill
Goodwill of this nature is treated as if it had been written off by the subsidiary just before the
parent acquired its controlling interest. If the subsidiary does not actually write off this goodwill,
one of the step
REPORT ON ACCOUNTING POLICIES
There are a number of users of the financial statements of TPL, each with different interests:
1. The shareholders/builders will use the financial statements to assess the profitability of
the Company and to determine what ca
Warranty liabilities and expenses
Future warranty expenses are difficult to estimate because few warranties of 10 years have
been offered in the marketplace. Accordingly, data on repair history for warranties longer than
one year are not available in the
Fair value method
If King no longer has significant influence, it would adopt the fair value method starting on the
date it lost significant influence. The balance in the investment account under the equity method
would be retained as the initial balance
Cost and retained earnings
Retained earnings under the cost method to what they would be using the equity method. Under
the equity method, the retained earnings of the parent contain the parent's share of the
subsidiary's net income since acquisition. Und
Accounting issues
Commission expense should be recognized on the same basis as the revenue-recognition
policy selected. To the extent that cash commission payments differ from the expense recorded,
prepaid commissions will be recorded on the balance sheet
APPENDIX I
Valuation of Investment Account
(in thousands of dollars)
Book value per draft financial statements $25,000
Reverse adjustment for prior period adjustment 2,400
Restated balance under equity method, beginning of year 27,400
Entries for year und
Business combinations
By purchasing 100% of the shares of Gainery Construction Ltd. (Gainery), TPL has obtained
control over Gainery. Accordingly, Gainery will need to be consolidated with TPL for reporting
purposes as of September 1, Year 1.
As indicated
Other contributed assets
It is necessary to determine the value to be ascribed to the other assets contributed to the new
partnership, namely, the property, plant and equipment. These assets can be recorded at their
net book values from the predecessor fi
