Reference no: EM132060924
Question - Cathy Carlson, CPA is a self-employed management consultant. Her business is called Carlson Consulting. She provides accounting and general business advice to her clients. In 2011, Cathy purchased a non-residential building for her office. It is a class 1 asset for CCA purposes.
At the beginning of the year, January 1, 2015, Cathy had unbilled work-in-process of $28,000, along with billed accounts receivables of $37,000. During 2015, her cash receipts total $105,000. On December 31, 2015, the unbilled work-in-progress has increased to $35,000 and the billed accounts receivables have increased to $42,000. Cathy elected to follow the rule under ITA 34 for professional businesses.
On January 1, 2015, the business had the following UCC balances:
Class 1 Building $226,000
Class 8 Furniture & fixtures 46,500
Class 10 Vehicle (purchased for $20,300) 17,255
During January 2015, Cathy acquired a new computer for $1,800, along with applications software of $725.
During March 2015, the Class 10 vehicle was involved in an accident, requiring it to be written off. The insurance proceeds were $12,300. On April 1, Cathy replaced it by leasing a $32,000 vehicle for $475 per month. Both vehicles were used 100% for business purposes.
During July 2015, Cathy replaced some of the office furniture. The old furniture had a capital cost of $18,000, while the new furniture cost $34,000. Cathy received a trade-in allowance of $6,000 for the old furniture.
During September 2015, Cathy acquired a client list from an accountant who is retiring. The cost of the list was $47,000.
During 2015, the various costs of operating her business, determined using the accrual basis of accounting, were as follows:
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Building operating costs
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$24,500
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Costs of operating the leased vehicle
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7,200
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Payment to assistants
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13,500
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General office costs
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3,750
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Meals with clients
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4,200
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Required: Calculate the minimum net business income Cathy would need to include on line 137 of her T1.