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Part B: Short Answer Problems Question #1 (10 marks) Casey Felt is the sole shareholder of Felt Enterprises Ltd

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Part B: Short Answer Problems Question #1 (10 marks) Casey Felt is the sole shareholder of Felt Enterprises Ltd., a small retail shop selling locally made arts and crafts. The shop has been in operation for several years and has a calendar fiscal year. Casey provides you with the Income Statement for the corporation for December 31, 2020. Calculate the net business income for 2020 (show your work, CCA and other calculations):

Question # 2 (20 marks) Larkin Ltd. is a hardware store located in Ontario. The HST rate in this Province is 13 percent. When the Quick Method is used in Ontario, the remittance rate is 4.4 percent for a retail business and 8.8 percent for a service provider. All of the Company’s revenues and expenses are incurred in Ontario. The Company has no associated business and files its HST return on an annual basis.

For the current year, its Income Statement is as follows (all amounts are without the inclusion of applicable HST): Revenues: Sales Of Fully Taxable Goods $103,000 Provision Of Exempt Services 38,000 $141,000 Less Expenses: Cost Of Goods Sold ($ 63,000) Amortization Expense ( 9,000) Salaries And Wages ( 8,000) Rent ( 24,000) Interest Expense ( 4,000) Other Operating Expenses ( 12,000) ( 120,000) Income Before Taxes $ 21,000 Less: Federal And Provincial Income Taxes ( 7,000) Net Income $ 14,000

1. Inventories of taxable goods increased by $6,000 during the year. 2. 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. Included was an expenditure for club dues for $2,000. 3. Of the Salaries And Wages, 22 percent were paid to employees involved in providing exempt services. 4. A capital expenditure was made during the year at a HST inclusive cost of $36,160. The expenditure was for equipment that will be used 40% 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. 5. A second capital expenditure was made for a building with a HST inclusive cost of $169,500. The building will be used 80% 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. Required: A. Calculate the net HST payable or refund that Larkin Ltd. will remit or receive for the current year using regular HST calculations (13 marks).

Question # 2 (Continued) B. Is Larkin Ltd eligible to use the Quick Method? If so, please state why. (2 marks) C. Assume that Larkin is eligible to use the Quick Method. Calculate the net HST payable or refund that Larkin Ltd. will remit or receive for the current year using the Quick Method. Conclude on the better method. (5 marks)