View the step-by-step solution to:

Hi there. Thank you.

Hi there. I was hoping that somebody could help me with this problem about Morton Forms. Included with the problem is the CCA calculation table, I need help with this as well. Thank you.



CCA.pngTAXATION.png

CCA.png

TAXATION.png

Monon Forms Morton Forms is a Canadian controlled private corporation speclallzjng in designing and printing
custom business forms It is owned by viola Moncn For the taxation year ended December
31, 2017, Ms Morton's daughter, Linda, who works in the business, has calculated a Net
Income for Morton Forms ol $576,183 ln calculating this figure, Linda used generally accepted
acoounting principles Linda has produced the followlng Income Statement for the year ended December 31, 2017 Morton runns lnc.
income statement
treat ending necember 3 1, 1017 Sales $ 7.573303
cost or Goods Sold 5,453,752
Gross prorit 2,110,151
Expe rises
General and Admin 5 352,000
Amom 13(an Expense 550,000
interest 3,500 1,410,500
0perating income 595,551
0ther Income:
loss on Dlsposzl of intangible Assets (17,000)
Interest Income 110,532
income belore income taxes 793,133
income Taxes
Current 102,000
ruture 3 5,000 217,000
Net lnmme S 576,183 During your review or Linda’s work and last years tax return lor the corporation, you have made
the lollowrng notes 1 In ttre accounting records, the Allowance tor Doubtrul Accounts was $25,000 at
December 31, 2017, and $20,000 at December 31, 2106, During 2017, the company
had actual wnteotls or 311,750 As a result, the accounting Bad Debt Expense was
$16,750 This amount is included in General and Admin expenses on the lncorne
statement A review of the listing o1 receivables (tor tax purposes), indicates that the actual items
that may be uncollectible total $15,000 at December 31, 2107 In 2016, the Dompany
deducted a reserve lor bad debts o1313,000 tor tax purposes General and Admin Expenses include
a) Donations to registered marities 27,000
b) Accrued Bonuses e Accrued Sept 1, 2017 Paid June 15, 2010 70,000 Meals and entertainment costs c) $1,000 per month Ior premium membership at golf club Ior Vlola 12,000 d) $200 per month lor membership at golf club tor salespeople 2,400 6) Meals while entertaining clients 32,000 I) Eood costs foerola's personal chel tor her meals at home 5,000 g) Annual summer BEG ror all slafi 6,000 h) Sponsorship or local baseball team where company name is 15,000
prominently displayed on lront ol iersey i) Advertising in a us tmde magazme directed at us clients 100,000 i) New sortmre purchased October 1, 2017 ($13,000 ror applications 30,000
and $25,000 for systems) k) Accounting and legal lees lor amended to the artides or 6,000
incorporation I) Costs to attend annual oonventlon o1 hnger knnters in Thailand 17,000 Whlle at the wnvemlon, Vlola was sure to hand out buslness Cards
and talk ICI Dmer aflendefi aboul her buslness wllh the lntenllun OI
claiming the convention as a business apense Interest atpense consists ol the lollowmg a) Interest expense , operations 5,000
b) Penalty and lnterej1 for late and insulhcient instalment payments 2,000
c) Interest on late payment o1 municipal property taxes 1 ,500 Travel costs (included in general and admin expenses) include both air travel and travel
reimbursement to employees tor business travel, The company policy is to reimburse
employees $0 50 per kilometer lor the business use cl their automobiles During the
year, seven employees each drove 4,000 on employment related activities and one
employee drove 7,500 kilometers None or the kilometer based allowances are required
I0 be included in the income ot the employees Maximum CCA has always been taken on all assets The undepleclaled Capllal cost
balances at January 1, 2017 were as tollows Class 1 4% $650 000
Class 8 95 000
Class 1 0 1 17 850
Class 14 SE 000
Class 14 1 1a 090
Class 53 135 000
Class 44 65,000 7 There was a loss on disposal at a limited life license to produce copyrighted materials for a maior distributor This license originally cost the company $95,000, and it was sold for
$03,000 in 2017 The book value ol the license at the time o1 sale was $30,000 When the license was sold, it was the only asset in 115 CCA class The loss was claimed as a
loss 0n disposal ol intangible assets on the Income Statement Purchases and sales or equipment and other capital assets made during 2017 were as
lollows (Mole any items discussed in other sections are included in this list as well) a The company purchased land and constructed a new building on ll during the year
The building was used 95% for manulactunng and processing The cost ol the land
ms $350,000, and the building cost $475,000 to construct b The company purchased a new set or lurntture for the reception area tor $1,200 c Some outdated desks used by the finance department wtth a cost o1 $5,000 were
sold tor pmceeds o1 $3,500 d Landscaping or grounds around the new building cost $35,000 This amount was
capitalized for accounting purposes e A company car lor use by the president of the company was purchased tor $90,000
This car replaced the only other existing company car, which vas purchased in 2013
tor $95,000 The old car was sold tor $60,000 1 A lence around the new building cost 552,000
g New sotiware was purchased $13,000 tor Applications and $25,0001cr Systems
The company sold some shares that had been purchased several years ago The capital gain on these shares was $152,700 Linda didn‘t know how to account tor the,
so she credtted the entire amount to retained earnings Rguired Determine Monon Farnls‘ minimum Net Income Ior Tax Purposes lor the year ending December
31, 2107 lgnore GST/HSTIPST implications Using the supplied tonnatted Excel spreadsheet, indicate your rationale for the treatment 0f all inlormation given

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question