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Question 13 (20 points)

The business will be run out of space that he has set aside in his residence. This space involves 25 percent of the total floor space in the residence.

The residence was acquired on January 1, 2017 at a total cost of $345,000. It is estimated that $95,000 of this total value can be attributed to the land on which the residence is situated. For the year ending December 31, 2018, Mr. Collins has the following costs that can be associated with this residence:

Utilities for Home (Heat, Light, And Water)	$2580
Mortgage Interest Paid	$8410
House Insurance	$600
Property Taxes	$3800
Repairs and Maintenance for Home	$3100
Total	$18,490

The business begins operations on March 1, 2018. On that date, Mr. Collins acquires the following assets to be used in his new business:

Office Furniture and Storage Racks	$12,000
Computer	$1650
Accounting Software	$750

In addition, he has a separate telephone line installed for dealing exclusively with the mail order business. The telephone charge includes charges for a toll-free number and a long-distance package.

During the period March 1, 2018 through December 31, 2018, his mail order sales total $118,000. Costs associated with these sales are as follows:

Cost of Merchandise Sold	$64,000
Unsold Merchandise (Lower of Cost and Market)	$11,500
Packaging Materials	$3600
Shipping Costs	$5800
Miscellaneous Office Supplies	$660
Telephone (Total Charge for The Period)	$1350
Printing of Posters and Brochures Distributed	$680

Required:

1. Compute the minimum net business income or loss that Mr. Collins must report in his 2018 personal income tax return. (17 marks)

Note Mr. Collins does not want to claim CCA on his personal residence.

Calculation of minimum net business income
	Yes/No	Amount	Comments/Remarks
Revenue
Cost of mechandise sold
Unsold Merchandise (Lower of Cost and Market)
Packaging Materials	Yes	3600
Shipping Costs	Yes	5800
Misc. Office Supplies	Yes	660
Telephone	Yes	1350
Printing of Psoters and Brochires	Yes	680
CCA	Yes/No	Amount
Office Furniture and Storgae Racks
Calculation
	Yes/No	Amount
Computers
Calculation

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