Question 1

Jordan was required to pay her own employment expenses in 20x0. The expenses deducted on her tax return totaled $12,000 which included $2,000 CCA. The expenses all included a 15% HST component, other than the CCA which had a deemed inclusion since HST was originally paid on the vehicle. If Jordan applied for an HST rebate in 20x1 when preparing her 20x0 tax return, what impact would the rebate have on her 20x1 tax return?

A) Increase in employment income of $1,304 and increase in UCC of $261
B)Increase in employment income of $1,304 and decrease in UCC of $261
C) Increase in employment income of $1,565
D) Decrease in employment income of $1,565

B

Accepted Answer

Jordan's employment expenses are subject to HST, so the total HST component paid on these expenses is $12,000 x 15% = $1,800. However, since the CCA component already had HST originally paid on the vehicle, only the remaining expenses are eligible for an HST rebate. This would be $12,000 - $2,000 = $10,000.

The HST rebate that Jordan can claim is 5/105 of the eligible expenses, which is $10,000 x 5/105 = $476. This amount will be included in her employment income for 20x1, since it is a rebate related to her employment expenses.

In addition, since $2,000 of CCA was claimed on her tax return, the UCC balance for this asset will be reduced by $2,000. However, since only the eligible expenses are used in calculating the HST rebate, the reduction in UCC will be $10,000 x 20% = $2,000 x 20% = $400. The net impact on UCC is therefore a decrease of $261 ($400 reduction, offset by $139 CCA deduction).

Therefore, the correct answer is B - Increase in employment income of $1,304 and decrease in UCC of $261.

Question 2

Sam began a small seasonal business in Prince Edward Island on July 1st, 20x7. He began operations slowly during the off-season, prior to a larger sale between October and March. Sam's sales of taxable supplies per quarter for the first fifteen months are provided here:

Required:
Apply the 'sales in quarter' and 'cumulative sales' tests to determine when Sam was required to become an HST registrant. Show your calculations and answer the following:
A. When did Sam lose his small supplier status?
B. What date was Sam required to start collecting HST?
C. By what date was Sam required to become an HST registrant?

Accepted Answer

A) Sam's sales have surpassed the $30,000 threshold in the January - March, 20x8 quarter under the cumulative sales test. Therefore, his small supplier status was lost on April 30^th, 20x8 (the end of the first month following this quarter). B) Sam was required to start collecting HST on May 1^st, 20x8. C) Sam needed to be registered prior to May 30^th, 20x8.

Question 3

With respect to GST/HST, supplies fall under different categories with different sets of rules.&#10;A)Which of the following is FALSE with regard to zero-rated supplies?&#10;B) GST/HST is charged at a rate of 0%.&#10;C) Prescription drugs and medical devices are examples of zero-rated supplies.&#10;D) Input tax credits may be claimed on expenditures made to provide the zero-rated supplies.

Accepted Answer

Zero-rated supplies are those supplies that are taxable, but at a rate of 0%. They are not exempt from GST/HST. Therefore, the statement "Zero-rated supplies are not subject to GST/HST" is false.

Question 4

Green Co. earned $20,000 in revenue and paid $15,000 in expenses (that do not include meals and entertainment). How much GST will Green Co. remit using the simplified ITC calculation? (Green Co. is in a province with 5% GST.)

A) $0
B)$238
C) $250
D) $652

Accepted Answer

To calculate the GST remittance using the simplified ITC calculation, we need to follow these steps:

1. Calculate the total GST collected:
- Revenue x 5% = $20,000 x 5% = $1,000

2. Calculate the total ITCs (input tax credits) available:
- Expenses x 5% = $15,000 x 5% = $750

3. Calculate the net GST payable:
- GST collected ($1,000) - ITCs available ($750) = $250

Therefore, the answer is B) $238.

Question 5

Blue Co. earned $80,000 in revenue and paid $45,000 in operating expenses. If Blue Co. elects to use the quick method, how much is the net HST remittance? (Blue Co. is in a province with 13% HST and an 8.8% remittance rate.)

A) $3,080
B) $4,550
C)$6,740
D) $7,040

Accepted Answer

The answer of Blue Co. earned $80,000 in revenue and...

Deck 22: Gsthst Overview