Unit 3 Quiz
Question 1
The following information is provided for Lacey Smyth, a commissioned sales employee of Canthrup Co. for the 2024 taxation year:
Salary $ 95,000
Commission 15,000
Amount paid by Lacey for meals and entertainment of clients and 3,200
potential clients of Canthrup
Lacey’s employer provides her with a vehicle for employment purposes. Of the 18,000 kilometres travelled, 8,100 kilometres were for personal purposes. The
correct amount for the standby charge is $3,790. Lacey paid all vehicle operating costs totalling $1,200 for the year.
Lacey is not provided with an office at her employer’s place of business so is required to use an office in her home. The office occupies 12% of the square footage
of the home. The following expenses were incurred with respect to the home in 2023:
Mortgage interest $ 16,200
Utilities 4,300
Property taxes 4,200
Insurance 2,800
How much should Lacey report for employment income for 2024?
a) $108,230
b) $110,174
c) $110,294
d) $111,774
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Option a) is incorrect. It was determined as follows:
Salary $ 95,000
Commission 15,000
Standby charge 3,790
Operating costs: $1,200 × (18,000 – 8,100) / 18,000 (660)
Meals and entertainment: $3,200 × ½ (1,600)
Home office: ($16,200 + $4,300 + 4,200 + 2,800) × 12% (3,300)
Employment income $ 108,230
12% of mortgage interest was deducted. Mortgage interest is not deductible to either an ordinary employee or a commissioned employee because it is
not specifically allowed under the ITA. Option b) is correct. It was determined as follows:
Salary $ 95,000
Commission 15,000
Standby charge 3,790
Operating costs: $1,200 × (18,000 – 8,100) / 18,000 (660)
Meals and entertainment: $3,200 × ½ (1,600)
Home office: ($4,300 + 4,200 + 2,800) × 12% (1,356)
Employment income $ 110,174
Question 2
Harold Clark received a $100,000 home relocation loan from his employer on September 1, 2023. He is required to pay interest at the end of each month at a
rate of 1% per annum. On January 1, 2024, he paid his employer $10,000 of the principal amount of the loan. Assume Canada Revenue Agency (CRA) prescribed
rates were as follows at relevant times:
, Quarter 2023 2024
First — 90 days 4.0% 4.0%
Second — 91 days 3.0% 3.0%
Third — 92 days 3.0% 3.0%
Fourth — 92 days 4.0% 2.5%
How much is the increase in Harold’s 2024 taxable income as a result of the loan (rounded to the nearest dollar)?
a) $1,687
b) $1,908
c) $1,874
d) $2,587
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Option b) is incorrect. It was determined as follows:
First quarter: 4.0% × $90,000 × 90/365 887.67
Second and third quarters: 3% × $90,000 × 1,353.70
Fourth quarter: 2.5% × $90,000 × 567.12
Interest paid: 1% × $90,000 (900.00)
Imputed interest benefit $ 1,908.49
Question 1
The following information is provided for Lacey Smyth, a commissioned sales employee of Canthrup Co. for the 2024 taxation year:
Salary $ 95,000
Commission 15,000
Amount paid by Lacey for meals and entertainment of clients and 3,200
potential clients of Canthrup
Lacey’s employer provides her with a vehicle for employment purposes. Of the 18,000 kilometres travelled, 8,100 kilometres were for personal purposes. The
correct amount for the standby charge is $3,790. Lacey paid all vehicle operating costs totalling $1,200 for the year.
Lacey is not provided with an office at her employer’s place of business so is required to use an office in her home. The office occupies 12% of the square footage
of the home. The following expenses were incurred with respect to the home in 2023:
Mortgage interest $ 16,200
Utilities 4,300
Property taxes 4,200
Insurance 2,800
How much should Lacey report for employment income for 2024?
a) $108,230
b) $110,174
c) $110,294
d) $111,774
,Hide question 1 feedback
Feedback
Option a) is incorrect. It was determined as follows:
Salary $ 95,000
Commission 15,000
Standby charge 3,790
Operating costs: $1,200 × (18,000 – 8,100) / 18,000 (660)
Meals and entertainment: $3,200 × ½ (1,600)
Home office: ($16,200 + $4,300 + 4,200 + 2,800) × 12% (3,300)
Employment income $ 108,230
12% of mortgage interest was deducted. Mortgage interest is not deductible to either an ordinary employee or a commissioned employee because it is
not specifically allowed under the ITA. Option b) is correct. It was determined as follows:
Salary $ 95,000
Commission 15,000
Standby charge 3,790
Operating costs: $1,200 × (18,000 – 8,100) / 18,000 (660)
Meals and entertainment: $3,200 × ½ (1,600)
Home office: ($4,300 + 4,200 + 2,800) × 12% (1,356)
Employment income $ 110,174
Question 2
Harold Clark received a $100,000 home relocation loan from his employer on September 1, 2023. He is required to pay interest at the end of each month at a
rate of 1% per annum. On January 1, 2024, he paid his employer $10,000 of the principal amount of the loan. Assume Canada Revenue Agency (CRA) prescribed
rates were as follows at relevant times:
, Quarter 2023 2024
First — 90 days 4.0% 4.0%
Second — 91 days 3.0% 3.0%
Third — 92 days 3.0% 3.0%
Fourth — 92 days 4.0% 2.5%
How much is the increase in Harold’s 2024 taxable income as a result of the loan (rounded to the nearest dollar)?
a) $1,687
b) $1,908
c) $1,874
d) $2,587
Hide question 2 feedback
Feedback
Option b) is incorrect. It was determined as follows:
First quarter: 4.0% × $90,000 × 90/365 887.67
Second and third quarters: 3% × $90,000 × 1,353.70
Fourth quarter: 2.5% × $90,000 × 567.12
Interest paid: 1% × $90,000 (900.00)
Imputed interest benefit $ 1,908.49
