Calculate the net business income

APPENDIX Accounting Information for 2019 James Specialty Bike Shop

Revenues Motorcycle and Parts Sales $432,000

Expenses Purchase of inventory (Note 1) $195,000

Local Advertising 5,100 Golf club dues (Note 2) 4,000

Fines and penalties (Note 3) 2,900 Insurance (Note 4) 8,000

Office expenses 3,000

Home Office expenses, excluding depreciation (Note 5) 2,940

Salaries (Note 6) 55,000

Employer contributions to CPP and EI 3,695

Depreciation (Note 7) 54,050

Loss on sale of equipment (note 7) 6,250

Truck Gas & maintenance (Note 8) 5,900 T

otal Expenses $345,835

Note 1: The opening inventory on January 1, 2019 was $10,000. The closing inventory on December 31, 2019 was $25,000.

Note 2: James joined the local golf club to find new customers. The membership cost was $4,000 for the year. Note 3: In 2019 the business was sued for selling branded motorcycle parts without proper authorization from the brand owner. James signed a new distributorship agreement with the brand owner effective January 1, 2019 and part of the agreement provides that James will pay a penalty of $2,900 for pre-2019 transactions that were completed without proper authorization, in exchange for the brand owner dropping the charges against James. The penalty was paid February 1, 2019. Note 4: The insurance expense includes the cost of the truck insurance of $1,500 see Note 8 below. Note 5: Starting March 1, 2019, James moved the bookkeeping office from the shop to his home. A room representing 12% of the 1,000sq.m. home was set aside for the exclusive use of Susan's bookkeeping functions. The home has a cost of $500,000. Below are the costs for 2019 relating to the home office space:

Home Insurance $1,500

Interest on mortgage $7,500

Property taxes $4,800

Home telephone line $500

Utilities $6,200

Maintenance and repairs $4,000

TOTAL $24,500 x 12% = $2,940

Note 6: There are 2 employees: one mechanic (George Dewlitle) and one bookkeeper (Susan Bond). George was paid a gross salary of $37,000 for 2019. Susan was paid a gross salary of $18,000 for 2019. The T4 slip for Susan is included as a separate pdf document to this case study for your information, confirming the CPP contributions ($739.50 - box 16), EI premiums ($291.60 - box 18) and Federal Income tax ($4,000.00 - box 22) withheld at source on her salary for 2019

. Note 7: The following is the information relating to the fixed assets of the business. Building: The building is 3,000 sq.m. located at 124 Main Street, Anytown, ON. Half the surface is used as a showroom for the customised motorcycles. The rest of the building is used as a shop for mechanic and customization work. The building was constructed on March 1, 2018 at a cost of $195,000. The UCC for tax purposes (class 1) at the beginning of 2019 was $189,150. Truck: The truck is a Ford F150 extended cab pick-up that James uses for both business and personal purposes see Note 8 for operating costs. The truck was purchased on June 1, 2018 at a cost of $55,000. For tax purposes, maximum CCA was deducted in 2018 leaving a UCC balance on January 1, 2019 of $25,500