Absolute Co. recorded total amortization of $5,000 in Year 1 (first year of operations), of which $1,000 is included as part of the cost of its ending inventory. In Year 2 the amounts were $10,250 and $1,250, respectively. For tax purposes Absolute Co. claimed capital cost allowance of $12,000 in each year.

Net income per financial statements, using absorption costing, was computed as follows:

Transcribed Image Text:

Gross revenue Opening inventory Cost of goods manufactured Year 1 $170,000 $0 100,000 Year 2 $340,000 $ 20,000 205,000