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Required: How would the preceding information affect the calculation of Olivia Smith's business income for the 2019 and 2020 taxation years? Include the full details of your calcula- tions, not just the net result for each year.

Required: How would the preceding information affect the calculation of Olivia Smith's business income for the 2019 and 2020 taxation years? Include the full details of your calcula- tions, not just the net result for each year.

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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Required: How would the preceding information affect the calculation of Olivia Smith's business income for the 2019 and 2020 taxation years? Include the full details of your calcula- tions, not just the net result for each year.
Transcribed Image Text:Required: How would the preceding information affect the calculation of Olivia Smith's business income for the 2019 and 2020 taxation years? Include the full details of your calcula- tions, not just the net result for each year.
Assignment Problem Six - 1 (Reserves) Olivia Smith is the owner of an unincorporated business that does landscaping. The business began operations on January 2, 2019 and has a December 31 year end. The 2019 and 2020 results for the business can be described as follows: 2019 During its first year, the business had sales of delivered merchandise and services totaling $185,000. Of this total, $65,000 had not been collected on December 31, 2019. Olivia anticipates that $5,000 of these sales will be uncollectible. In addition to these sales of delivered merchandise and services, she received $23,000 in advances for merchandise to be delivered in 2020o. Olivia purchased a large supply of landscaping materials from the trustee of a bank- rupt landscaping business at a very good price. Since she is unlikely to use them in the next few years, she has arranged to sell these materials for $50,000. These materials have a cost of $40,000, resulting in a total gross profit of $10,000. Because of the size of this sale, she has agreed to accept a down payment of $30,000, followed by two annual instalments of $10,000. The instalments are due on December 31, 2020 and December 31, 2021. 2020 During 2020, $5,500 of accounts receivable had to be written off. All of the merchandise for which advances had been received was delivered and the $10,000 instalment on the 2019 sale of landscaping materials was received. Sales of delivered merchandise and services totaled $240,000. Of this total, $50,000 was still on account at December 31, 2020. Olivia anticipates that $3,500 of this amount will be uncollectible. In addition to the 2020 sales of delivered merchandise and services, she receives $13,400 in advances for merchandise to be delivered in 2021.
Transcribed Image Text:Assignment Problem Six - 1 (Reserves) Olivia Smith is the owner of an unincorporated business that does landscaping. The business began operations on January 2, 2019 and has a December 31 year end. The 2019 and 2020 results for the business can be described as follows: 2019 During its first year, the business had sales of delivered merchandise and services totaling $185,000. Of this total, $65,000 had not been collected on December 31, 2019. Olivia anticipates that $5,000 of these sales will be uncollectible. In addition to these sales of delivered merchandise and services, she received $23,000 in advances for merchandise to be delivered in 2020o. Olivia purchased a large supply of landscaping materials from the trustee of a bank- rupt landscaping business at a very good price. Since she is unlikely to use them in the next few years, she has arranged to sell these materials for $50,000. These materials have a cost of $40,000, resulting in a total gross profit of $10,000. Because of the size of this sale, she has agreed to accept a down payment of $30,000, followed by two annual instalments of $10,000. The instalments are due on December 31, 2020 and December 31, 2021. 2020 During 2020, $5,500 of accounts receivable had to be written off. All of the merchandise for which advances had been received was delivered and the $10,000 instalment on the 2019 sale of landscaping materials was received. Sales of delivered merchandise and services totaled $240,000. Of this total, $50,000 was still on account at December 31, 2020. Olivia anticipates that $3,500 of this amount will be uncollectible. In addition to the 2020 sales of delivered merchandise and services, she receives $13,400 in advances for merchandise to be delivered in 2021.
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