Frank Thompson, owner of Percolator Courier Inc., has prepared the following statement of comprehensive income for accounting purposes for the year ended December 31, 2019:

Percolator Courier Inc.

Statement of comprehensive income For the year ended December 31, 2019

Revenues	$2,550,000
Cost of goods sold	850,000
Gross profit	$1,700,000
Expenses: Depreciation	$240,000
Selling expenses	200,000
Warranty expense	54,000
Other	100,000
Income before income taxes	$1,106,000

Additional information:

The company offers a one-year warranty. Its warranty liability account had a credit balance of $20,000 at the beginning of the year. During the year, warranty costs paid totaled $22,000.

A capital asset with a net book value of $70,000 was sold during the year for

$55,000 (it originally cost $120,000). The loss has been included in revenue.

Capital cost allowance has been correctly calculated for 2019 as $184,500. There is no recapture or terminal loss on the capital asset that was sold.

Selling expenses include $30,000 of expenditures for meals and entertainment.

There is a net capital loss carry forward of $18,000 available to be used against taxable income of the current year.

Taxable capital is less than $10 million, and the company is not associated with any other corporation.

Opening balance in the non-eligible refundable dividend tax on hand (NERDTOH) for the year is $12,000. The opening balance in the eligible RDTOH (ERDTOH) was nil.

The dividend refund received on non-eligible dividends paid in the prior year was

$4,000.

Taxable dividends paid in year were $18,000 of non-eligible dividends.

Included in revenue is investment income consisting of:

Interest income on long-term investments	2,000
Gain on sale of long-term investments	54,000
Dividends from taxable Canadian corporations (Note 1)	41,000

Note 1: Dividends consist of the following:

Non-connected corporations (portfolio dividends) $19,000 Connected corporations 20,000

Percolators proportionate share of the dividend refund received by the connected corporations on payment of the $20,000 of non-eligible dividends was $6,000.

Required:

In the Excel file provide calculate the following:

Part A: Net income for tax purposes using the information provided above. Part B: Calculate taxable income using the information provided above.

Part C: Calculate the following:

federal taxes payable Part I

federal taxes payable Part IV

ERDTOH and NERDTOH balances

dividend refund, if any

Part D: Prepare a short memo, with an example, explaining to Frank Thompson which

dividend (eligible or non-eligible dividend) provides a higher after tax cashflow and why?

Assume the following provincial dividend tax credits (of grossed up amount): eligible dividends 10%; non-eligible dividends 3.2683%.