a) In the MTG section 10-402 it says that expenses such as this is fully deductible if functions like these are held on the business premises. It doesn’t clarify in the assignment question where these barbeques are held. Gray engineering can only claim 50% of the expenses to do with the barbeque held for staff on the Fridays.
$1500 x 0.50 = 750
$1200 x 0.50 = 600
750 + 600 = $1350 is deductible.
$10,000 of the promotion expenses are fully deductible as stated in the MTG 10-402 under Entertainment Exclusions. $5,000 spent on morning tea and refreshments is fully deductible as stated in the MTG 10-402 under, Entertainment.
Are all the expenses deductible? No.
$1,350 + $10,000 + $5,000 = $16,350 is deductible.

Gray Engineering cannot claim the $17,700 in full. Only $16,350 is allowable.

b) The $34,000 that was received for the repairs of the building is included as income as it is said under Insurance payments for depreciable property on the IRD website.
($40,000 was the total for the repairs. $6,000 is exceeding the amount paid out).
So, the $6,000 excess that wasn’t covered in the insurance payment is an addition to the adjusted assets tax book value. This is found in the MTG 5-049.
The $46,000 that Gray Engineering claimed is correct for the loss of income for the two days no work was able to be done. This is shown in the MTG 5-045.
Gray Engineering included the full $80,000 in its 2014 return. On the IRD website under Insurance payments for depreciable property, section Income Tax “if you receive the insurance payment after your tax year has ended, you include this amount as income in your return for the next tax year”. The insurance payment to Gray Engineering was paid to them in May 2014 and their tax year ended in March 2014.
My understanding is that Gray Engineering cannot put this in the 2014 tax year return. It needs to be filed