How would the preceding information affect the calculation

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Reference no: EM133927990

Problem

Amélie Gagnon carries on a landscaping business as a sole proprietor. The business commenced on January 2, 2024, and has a December 31 fiscal period. The 2024 and 2025 results for the business can be described as follows:

2024 - During its first year, the business had sales of delivered merchandise and services totaling $185,000. Of this total, $65,000 are shown as accounts receivable on December 31, 2024. Amélie anticipates that $5,000 of the receivables are doubtful of collection.

In addition to these sales of delivered merchandise and services, she received $23,000 in advances for merchandise to be delivered in 2025.

Amélie purchased a large supply of landscaping materials from the trustee of a bankrupt landscaping business at a very good price. Since she is unlikely to use them in the next few years, she has arranged to sell these materials for $50,000. The sale takes place in September 2024. These materials have a cost of $40,000, resulting in a total gross proft of $10,000. Because of the size of this sale, she has agreed to accept a down payment of $30,000, followed by two annual instalments of $10,000. The instalments are due on December 31, 2025, and December 31, 2026.

2025 - In 2025, $5,500 of accounts receivable were determined to be bad and were writ-ten off. All of the erchandise for which advances had been received was delivered and the $10,000 instalment on the 2024 sale of landscaping materials was received.

Sales of delivered merchandise and services totaled $240,000. Of this total, $50,000 are shown as accounts receivables at December 31, 2025. Amélie anticipates that $3,500 of this amount will be doubtful of collection. Get the instant assignment help.

In addition to the 2025 sales of delivered merchandise and services, she receives $13,400 in advances for merchandise to be delivered in 2026.

How would the preceding information affect the calculation of Amélie Gagnon's business income for the 2024 and 2025 fiscal periods?

Reference no: EM133927990

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