tudent question Time to preview question: PART A: Happy House Cleaning Inc. (“HHC”) was incorporated on May 5, 2020 to provide on-demand house cleaning services. At the time of incorporation, HHC establishes December 31 as its year-end for both tax and accounting purposes. On May 9, 2020, HHC purchased nine cars (CCA Class 10; 30% rate) to be used by the cleaning personnel at a cost of $23,000 per vehicle. On December 2, 2021, HHC trades in two of its old cars for three new minivans. The list price of the new minivans is $28,000 per vehicle and HHC receives a trade-in allowance towards this list price of $12,000 per old vehicle. HHC paid cash for the remaining balance. —REQUIRED Calculate the maximum Class 10 CCA that can be deducted for the years ending December 31, 2020, and 2021. Ignore the leap year. Calculate the opening UCC balance for the following 2022 year. PART B: Cool Rugs Inc., “The Company”, has a December 31 year-end. On January 1, 2021, The Company’s Class 13 UCC balance is $350,000. This opening balance represents leasehold improvements of $600,000 made during 2019. The three-year lease was negotiated in 2019. It has four renewal options, each for three years. No other leasehold improvements were made until November 2021. During November 2021, The Company made further leasehold improvements of $300,000. —REQUIRED Calculate the maximum Class 13 CCA that can be deducted for the year ending December 31, 2021. Calculate the opening UCC balances for the following 2022 year.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
tudent question
Time to preview question:
PART A:
Happy House Cleaning Inc. (“HHC”) was incorporated on May 5, 2020 to provide on-demand house cleaning services. At the time of incorporation, HHC establishes December 31 as its year-end for both tax and accounting purposes.
On May 9, 2020, HHC purchased nine cars (CCA Class 10; 30% rate) to be used by the cleaning personnel at a cost of $23,000 per vehicle. On December 2, 2021, HHC trades in two of its old cars for three new minivans. The list price of the new minivans is $28,000 per vehicle and HHC receives a trade-in allowance towards this list price of $12,000 per old vehicle. HHC paid cash for the remaining balance.
—REQUIRED
Calculate the maximum Class 10 CCA that can be deducted for the years ending December 31, 2020, and 2021. Ignore the leap year. Calculate the opening UCC balance for the following 2022 year.
PART B:
Cool Rugs Inc., “The Company”, has a December 31 year-end. On January 1, 2021, The Company’s Class 13 UCC balance is $350,000. This opening balance represents leasehold improvements of $600,000 made during 2019. The three-year lease was negotiated in 2019. It has four renewal options, each for three years. No other leasehold improvements were made until November 2021. During November 2021, The Company made further leasehold improvements of $300,000.
—REQUIRED
Calculate the maximum Class 13 CCA that can be deducted for the year ending December 31, 2021. Calculate the opening UCC balances for the following 2022 year.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
