Hasnain runs a skydiving experience business,? don?t look down Inc.(DLD)?. He is incorporated and travels around the world establishing best in class jumping experiences. This is DLD?s first year as an incorporation and Hasnain has come to you for some advice. The following information is provided to you by your client.
?I?m not sure how this works? I billed my clients in Canadian dollars for the fees to set up their jumps, but the jumps took place all over the world. Do I have to pay any taxes to those other countries??
?The business is really taking off (pardon the pun), I have customers who are now pre-planning their jumps up to 5 years from now. I?m pretty excited, and have some extra cash on hand now because I?ve charged them a 25% deposit for their jumps.?
?When I incorporated my company, I was living in Toronto, but I was getting so tired of the pace ? it?s so much more relaxed here on the east coast. I can see myself living in Shelburne NS for the rest of my life.?
?Listen, I know there are a lot of ?loopholes? and when you file my taxes, there are maybe some things you could ?leave out?? you know?? If you happened to get me a refund on my taxes, I can hook you up with an awesome dive.?
1) Provide any tax/accounting advice you think may be appropriate for DLD to consider/know. Remember to reference your tax source.
2) What further questions / information might you request from DLD?
3) How would you respond to Hasnain?s offer?
Q2. Brandon and Christian own Tiki Tours company, a Canadian incorporated company which plans sea cruises around the beautiful islands of Antigua and the Caribbean. They have come to you to file their taxes, and as a junior associate on the file, you?ve been asked to complete the schedule 1 adjustments to calculate Net Income for Tax Purposes.
Year ended Dec 31 2016
Statement of Earnings
Selling & Admin Expenses
Salaries and wages
Yacht club dues
Meals and entertainment
Income Tax expense
1. During the year, the company estimated uncollectable accounts of $2800. This was increased
from last year’s estimate of $3200. They always claim a reserve when available.
2. The company had taken a reserve in 2015, based on a large scale cruise they were organizing. The
revenue of which was $350,000 and the estimated profit from the cruise would be $160,000. The customers
agreed to make 3 equal payments before their cruise date. The first payment was received on March 1 2016.
REQUIRED: Calculate Tiki Tour?s Net income for tax purposes and provide any additional advice you think these clients should have. (Be sure to list any assumptions you make, and reference your tax sources).