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net income

net income

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Greyon Inc. operates an active business. Financial statements for the year ended December 31, 2021, report a net income before taxes of $300,000. The following additional information is provided for 2021. 1. Greyon's net income is summarized as follows: Income from business operations $280,000 Gain on sale of capital assets Interest on a bond investment 15,000 Building construction Heating and cooling systems Landscaping of grounds 5,000 $300.000 2. During the year, Greyon completed construction of a new warehouse building and its cost of $600,000 was added to the balance sheet. The cost consists of the following: $500,000 80,000 20,000 $600,000 3. Greyon's balance sheet includes an amount for goodwill acquired from a previous business acquisition. During the year, a goodwill impairment loss of $30,000 was deducted from the Income from business operations. 4. Legal expenses, deducted in arriving at income from business operations, include $2,000 for drafting the mortgage document the new warehouse, $1,000 to Investigate a zoning limitation on the new warehouse site, and $5,000 for the audit fee. 5. A management bonus of $60,000 was announced and accrued in September. The bonus was paid in two equal instalments on January 31 and April 30 of the following year, 2022.
Transcribed Image Text:Greyon Inc. operates an active business. Financial statements for the year ended December 31, 2021, report a net income before taxes of $300,000. The following additional information is provided for 2021. 1. Greyon's net income is summarized as follows: Income from business operations $280,000 Gain on sale of capital assets Interest on a bond investment 15,000 Building construction Heating and cooling systems Landscaping of grounds 5,000 $300.000 2. During the year, Greyon completed construction of a new warehouse building and its cost of $600,000 was added to the balance sheet. The cost consists of the following: $500,000 80,000 20,000 $600,000 3. Greyon's balance sheet includes an amount for goodwill acquired from a previous business acquisition. During the year, a goodwill impairment loss of $30,000 was deducted from the Income from business operations. 4. Legal expenses, deducted in arriving at income from business operations, include $2,000 for drafting the mortgage document the new warehouse, $1,000 to Investigate a zoning limitation on the new warehouse site, and $5,000 for the audit fee. 5. A management bonus of $60,000 was announced and accrued in September. The bonus was paid in two equal instalments on January 31 and April 30 of the following year, 2022.
00:000 3. Greyon's balance sheet includes an amount for goodwill acquired from a previous business acquisition. During the year, a goodwill impairment loss of $30,000 was deducted from the income from business operations. 4. Legal expenses, deducted in arriving at income from business operations, include $2,000 for drafting the mortgage document for the new warehouse, $1,000 to investigate a zoning limitation on the new warehouse site, and $5,000 for the audit fee. 5. A management bonus of $60,000 was announced and accrued in September. The bonus was paid in two equal instalments on January 31 and April 30 of the following year, 2022. 6. Advertising and promotion, deducted in computing income from business operations, includes $20,000 for airing a TV commercial, $30,000 for production of the TV commercial, $5,000 for club memberships in a sports-related facility to enhance business contacts, and $12,000 for acquiring a permanent mailing list for seeking new customers. 7. The income statement includes the following additional expenses: $41,000 6,000 Amortization Charitable donations Volume rebates and discounts on purchases 13,000 Architect's fee for design of new warehouse building 25,000 8. Capital cost allowance has been correctly calculated as $58,000. Required: (a) Determine Greyon's business income for tax purposes for 2021. (b) Determine Greyon's net income for tax purposes in accordance with the aggregating formula.
Transcribed Image Text:00:000 3. Greyon's balance sheet includes an amount for goodwill acquired from a previous business acquisition. During the year, a goodwill impairment loss of $30,000 was deducted from the income from business operations. 4. Legal expenses, deducted in arriving at income from business operations, include $2,000 for drafting the mortgage document for the new warehouse, $1,000 to investigate a zoning limitation on the new warehouse site, and $5,000 for the audit fee. 5. A management bonus of $60,000 was announced and accrued in September. The bonus was paid in two equal instalments on January 31 and April 30 of the following year, 2022. 6. Advertising and promotion, deducted in computing income from business operations, includes $20,000 for airing a TV commercial, $30,000 for production of the TV commercial, $5,000 for club memberships in a sports-related facility to enhance business contacts, and $12,000 for acquiring a permanent mailing list for seeking new customers. 7. The income statement includes the following additional expenses: $41,000 6,000 Amortization Charitable donations Volume rebates and discounts on purchases 13,000 Architect's fee for design of new warehouse building 25,000 8. Capital cost allowance has been correctly calculated as $58,000. Required: (a) Determine Greyon's business income for tax purposes for 2021. (b) Determine Greyon's net income for tax purposes in accordance with the aggregating formula.
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