Gamma Systems - Business Cases
Gamma Systems Ltd.
Financial Statements GAMMA SYSTEMS LTD. BALANCE SHEET For the five months ended August 31, 2014 UNAUDITED August 31, 2014
ASSETS Cash 1,400
Accounts receivable & Sundry 3,000
Gym equipment (net of depreciation) 1,600 6,000
LIABILITIES Loans payable 1,000
Shareholder's advances 2,400 Income taxes payable 413 3,813
SHAREHOLDER'S EQUITY Stated Capital Issued 100 Common shares 100 Retained Earnings 2,087 6,000 GAMMA SYSTEMS LTD. Non-Consolidated Statement of Income and Retained Earnings
For the five months ended August 31, 2014 UNAUDITED August 31, 2014
REVENUES Sales 7,500
Cost of sales 3,100 Gross profit 4,400
EXPENSES Amortization 400
Salaries and benefits 1,500 1,900
NET INCOME 2,500
Provision for income taxes 413 NET INCOME AFTER TAXES 2,087
Retained Earnings, beginning of year -
Dividends - Retained Earnings, end of year 2,087
b) Jesse’s compensation.
There are two options for Jesse to withdraw funds from the corporation: through paying himself a salary or by paying himself dividends. The tax treatment of each option may influence Jesse’s decision. He would pay minimum tax by taking the $1,500 in salary and would also help reduce the tax liability for his corporation. If he takes a dividend, he would pay approximately 29% tax on
Financial Statements GAMMA SYSTEMS LTD. BALANCE SHEET For the five months ended August 31, 2014 UNAUDITED August 31, 2014
ASSETS Cash 1,400
Accounts receivable & Sundry 3,000
Gym equipment (net of depreciation) 1,600 6,000
LIABILITIES Loans payable 1,000
Shareholder's advances 2,400 Income taxes payable 413 3,813
SHAREHOLDER'S EQUITY Stated Capital Issued 100 Common shares 100 Retained Earnings 2,087 6,000 GAMMA SYSTEMS LTD. Non-Consolidated Statement of Income and Retained Earnings
For the five months ended August 31, 2014 UNAUDITED August 31, 2014
REVENUES Sales 7,500
Cost of sales 3,100 Gross profit 4,400
EXPENSES Amortization 400
Salaries and benefits 1,500 1,900
NET INCOME 2,500
Provision for income taxes 413 NET INCOME AFTER TAXES 2,087
Retained Earnings, beginning of year -
Dividends - Retained Earnings, end of year 2,087
b) Jesse’s compensation.
There are two options for Jesse to withdraw funds from the corporation: through paying himself a salary or by paying himself dividends. The tax treatment of each option may influence Jesse’s decision. He would pay minimum tax by taking the $1,500 in salary and would also help reduce the tax liability for his corporation. If he takes a dividend, he would pay approximately 29% tax on