Reference no: EM132462754
Problem - LeeNing Sports is a retail business located in Nova Scotia. All of its revenues occur in that province, as do expenses incurred. It has no associated business and files its HST return on an annual basis. Nova Scotia has a 15 percent HST. The Nova Scotia quick method rates are 5.0 percent for businesses that purchase goods for resale and 10.0 percent for service providers.
LeeNing's Income Statement for the current year is as follows. All amounts are shown without the relevant HST.
Revenues
Fully Taxable Goods $400,000
Exempt Services 109,564 $509,564
Less Expenses: Cost of Goods Sold (All Taxable) ($220,000)
Amortization Expense (34,784)
Salaries and Wages (25,679)
Rent (27,841)
Interest Expense (75,964)
Other Operating Expenses (30,000) (414,268)
Income Before Taxes $95,296
Less: Federal And Provincial Income Taxes (21,489)
Net Income $73,807
Other Information -
1. Inventories of taxable goods decreased by $20,000 during the year.
2. A capital expenditure was made during the year at an HST inclusive cost of $115,000. The expenditure was for equipment that will be used 60 percent for the provision of fully taxable goods. HST was paid on the acquisition of all assets on which amortization is being taken during this period.
3. All of the Other Operating Expenses involved the acquisition of fully taxable supplies and were acquired to assist in the provision of fully taxable supplies.
4. The rent was not subject to HST as it was paid to a non-registrant. The proportion of the leased property that is used for the provision of exempt services is 20 percent.
5. Of the Salaries and Wages, 40 percent were paid to employees involved in providing exempt services.
Required -
A. Calculate the net HST payable or refund that LeeNing Sports will remit or receive for the current year using regular HST calculations.
B. Determine whether LeeNing Sports can use the quick method for determining its HST payment or refund for 2018.
C. Without regard to your conclusion in Part B, determine LeeNing Sports HST payable (refund) for the year ending December 31, 2018, using the quick method.
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