Reference no: EM133022427

Question - Bob the Builder purchases a piece of equipment on May 24, Year 1. List price of the equipment is $66377. However, Bob only pays 85% of list price thanks to Victoria Day sales event. There is an additional $1,000 for the delivery and installation. 13% HST is applied at the very end (in other words, HST is applied to $1,000 as well). Bob follows IFRS and the residual value is set to $0 for this equipment. Useful life for the equipment is 6 years and SL method is being used for the equipment. Bob's fiscal year-end is December 31 and the depreciation expense is only recognized once at the end of the fiscal year. The equipment is sold for $44,000 on April 4, Year 4.

a) Determine total $ amount Bob has to capitalize for the equipment.

b) Assuming mid-month convention is in place, what would be gain or loss on sale of the equipment?

c) Assuming half-year convention is in place, what would be gain or loss on sale of the equipment?

d) If Bob's business is in a province, where 5% GST and 8% PST are in place, what would be your answer for (1)? If there is no change, then please say so.

e) If Bob's business is in a province, where 5% GST and 8% PST are in place, what would be your answer for (2)? If there is no change, then please say so.