On July 1, 2018, Molly Malone started her own business on as a self-employed salesperson. (By the way, there are
184 days from July 1 to December 31.) Molly’s business is HST registered. The following information relates to her revenue and expenditures from July 1, 2018 to December 31, 2018 and the HST received/paid is not included in these amounts:
(a) Total commissions received in 2018 $ 50,000
(b) Commissions billed, but uncollected as at December 31, 2018 5,000
(c) Of the commissions owing to her as at December 31, 2018, Molly estimated that one account will be uncollectible in the amount of 500
(d) Salary paid to Molly’s husband, Frank, for bookkeeping services 45,000 (This amount was based on $40 per hour for 1125 hours of service. The market rate for such services in 2018 was $20 per hour)
(e) On July 1, 2018, Molly purchased a vehicle at a cost of 40,000
This amount includes the HST. Molly has determined that the car is used 80% for business use and expects that this percentage will vary from year to year.
(f) On November 30, 2018, Molly decided to downgrade her automobile and sold the car referred to in part (e) above for proceeds of $20,000. On December 1, 2018 she purchased another vehicle at a cost of $18,000. This amount excludes HST and the business use was 80% and expects that this percentage will vary from year to year.
(g) Auto and travel costs:
Vehicle operating costs $ 1,500 (these are the TOTAL costs incurred from July 1, 2018 to December 31, 2018)
(h) Interest paid on the loan to purchase the vehicle in item (e) [153 days] $1,600 Molly paid cash for the vehicle referred to in part (f).
(i) Molly attended 3 conventions during the first six months of her business. The costs were as follows:
Convention 1 (includes $140 for meals) $ 600 Convention 2 (no cost allocation available for meals the convention lasted for 2 days) 400 Convention 3 (includes $50 for meals) 200
(j) Cost of computer purchased in July, 2018 $2,500 Molly has estimated that the computer is used 75% for business use.
(k) Cost of accounting software package, also purchased in July, 2018 (100% business use) $ 800
(l) Cost of office furniture purchased in July, 2018 $ 1,000
(m) Molly conducted the business out of her house. She has set aside office space, which occupies approximately 10% of the total square footage of the house. The total house expenditures for the twelve months of 2018 were as follows:
Mortgage -principal $ 4,400
Repairs and maintenance 600 Municipal taxes 2,100
Heat and hydro 1,680
(n) Cost of office supplies used 650
(o) Cost of business telephone line 1,600
(p) Tennis club membership dues 950
Using proper income statement format, a Statement of Income from Self-employment and CCA Schedule for the year ended December 31, 2018, to be filed by Molly Malone with her 2018 personal income tax return. (Use the accrual basis to calculate her net income).