Samson Enterprises Ltd. achieved a profit in 20X1 of $120,000.The income statement is summarized below.
Sales ……………………………….. $1,300,000
Cost of sales……………………………….. 780,000
Gross profit ……………………………….. 520,000
Administrative and selling expenses …… 451,000
………………………………..………… 69,000
Other income (expenses) ………………. 51,000
Net income before tax …………………… $ 120,000
Certain details of the summarized income statement are provided below.
1. Administrative and selling expenses include the following:
(a) Donations to registered charities $ 3,000
(b) Amortization/depreciation of tangible assets 12,000
1: At the end of the previous year, the undepreciated capital cost of certain asset classes was as follows:
Class 1………….. $80,000
Class 8………….. 32,000
Class 10………….. 50,000
2: During the current year, the company sold its land and building for $150,000 (land $40,000, building $110,000) and moved into leased premises. The original cost of the property was $130,000 (land $30,000, building $100,000).The building had an accounting book value of $70,000 at the time of sale.
(c) Legal fees:
• Settling a dispute relating to the purchase of defective merchandise for sale 4,000
• Reorganizing the corporation’s share capital 8,000
(d) Amortization 9,000
3: The company owns several pieces of equipment. During the year, one unit that originally cost $10,000 and had a book value of $6,000 was sold for $8,000.
The current year’s amortization expense applies to a number of intangible assets.
• During the previous year (20X0), the company took over a competitor and purchased goodwill for $40,000 and a franchise (unlimited life) for $10,000.
• During the current year, the franchise was sold for $8,000 when its book value for accounting purposes was $9,000. In addition, the company purchased an existing patent from a competitor for $20,000.The patent with a remaining legal life of 10 years was purchased on the first day of the current year.
2 Other income (expenses) includes the following:
Gain on sale of land…………………………….. $10,000
Gain on sale of building…………………………….. 40,000
Gain on sale of equipment ………………………… 2,000
Loss on sale of franchise …………………………….. (1,000)
……………………………..……………………… $51,000
Required:
Determine the net income for tax purposes of Samson Enterprises for the 20X1 taxation year.