Below outlines the income statement for Carl Corporation for the $2023$ fiscal year. Notes follow below with additional details.

Carl Corporation Income Statement For the Year Ended December $31,2023$

Revenue:

Sales Revenue

$950,000$

Cost of Goods Sold

$210,000$

Gross Margin

$740,000$

Operating Expenses:

Salaries Expense

$500,000$

General and Administrative Expenses

$40,000$

Repairs and Maintenance

$30,000$

Depreciation

$20,000$

Advertising and Promotion

$25,000$

Insurance

$15,000$

Meals and Entertainment

$5,000$

Club Dues

$3,000$

Total Operating Expenses

$638,000$

Operating Income

$102,000$

Other Income and Expenses:

Interest Income

$5,000$

Interest Expense

$(10,000)$

Gain on Sale of Property, Plant, and Equipment

$15,000$

Total Other Income and Expenses

$10,000$

Income Before Tax

$112,000$

Provision for Income Tax $($estimate$)$

$22,400$

Net Income

$89,600$

Notes:

$1)$

Advertising and promotion included $$5,000$ related to donations to registered charities and $$1,000$ in advertising online targetted at US customers through a US media outlet.

$3)$

General and Administrative Fees include bank charges for the year alongside other miscellaneous expenses. Some of the amounts included are as follows:

a

Bank Fees for operating accounts of $$2,667.$

b

Interest and penalties from CRA of $$1,500.$

c

Accounting fees of $$2,500$ related to an HST filing dispute with CRA.

d

Warranty provision of $$6,000$ with an actual warranty expense of $$3,000.$

e

The general and administration account includes a $$5,000$ provision related to a client accident. The lawsuit has not been settled or fully determined yet, but is expected to be settled in $2024.$

$4)$

The gain on sale of property plant and equipment is for a class $8$ piece of machinery with a net book value of $$45,000$ being sold for $$60,000.$ The original cost of the asset was $$75,000.$ The UCC balance for this class $8$ asset was $$45,000.$

$5)$

The insurance line item includes $$10,000$ of business insurance and a $$5,000$ premium for an additional $$700,000$ of life insurance for the executives of Carl Corporation.

$6)$

A summary of the salaries and benefits expense account is provided in Exhibit $1.$

$7)$

The interest expense relates entirely to bank interest related to a revolving credit card, which is paid off regularly during the year. No bank loans or lines of credit exist.

$8)$

The interest income is entirely composed of investments in short$-$term marketable securities$.$ These securities were held for the purposes of trading on an active market during the year.

$9)$

Meals and Entertainment includes $$1,000$ related to two company parties where all employees were invited to attend.

$10)$

Carl Corporation entered into a barter arrangement for services with Frank Corporation. The services were recorded at the FMV of the services received of $$5,000.$ The services provided in exchange were for $$10,000.$

Required $$

a$)$

Calculate Carl$$s minimum business income for tax purposes. Start with accounting net income of $$89,600$ and adjust. Use the accelerated investment incentive when calculating CCA.

b$)$

Comment on the impact to employees of items in Exhibit $1$s $$notes$($i$.$e$.$ how will these payments by Carl impact their employment income calculation?$)$