Question

Photo Tonight, a film-developing and camera-repair franchise, began business on January 1, 2020. In the process of beginning operations, it incurred the following capital expenditures: Developing equipment $ 85,000 Furniture and fixtures 35,000 Small tools (under $500) 20,000 Class 14 Franchise (expires in 20 years) 80,000 Incorporation costs 6,000 Pickup truck 14,000 Class 13 Leasehold improvements (10-year lease) 32,000 The business was immediately successful and generated substantial profits for the years ended December 31, 2020 and 2021. In 2021, the truck was traded in for a larger unit costing $ 20,100. A value of $ 7,000 was assigned to the old truck when it was traded in. In 2022, the owner was forced to leave the business due to illness. As a result, the assets were valued and sold on December 31, 2022, for the following values: Developing equipment $ 65,000 Furniture and fixtures 15,000 Small tools 12,000 Franchise 84,000 Incorporation costs –0– Pickup truck 15,000 Leasehold improvements 15,000 Goodwill 40,000 Required: Complete the table below to calculate the effect of all these transactions on net income for tax purposes for the 2020, 2021, and 2022 taxation years. (Use a minus sign (-) when entering numbers that reduce UCC.)

Answer 1

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