Instructions

- Submit your answer using an Excel file through Blackboard.

- Show all calculations

Question 1 (20 marks)

The controller of Cinesphere Inc., a Canadian public corporation, has prepared the accounting income statement for the year ended March 31, 2019:

Sales . . . . .. . .. . .. . .. . .. . .. . . . .. . .. . . . .. . .. . .. . .. . .. . $995,000

Cost of sales . . . .. . .. . .... . .$523,000

Administrative expenses . . . .185,000 (708,000)

Operating income . . . . . .. . . . . . . . . . . . . . . . ......... . . . . . .$287,000

Other income and expenses . . . . . . . . .. . . . . . . .. . . . . . . . . 55,000

$342,000

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (102,000)

Net income . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .$240,000

Other Information

(1) Included in the calculation of Administrative expenses:

(a) Interestonlateincometaxpayments ......................... $435

(b) Amortization(maximumcapitalcostallowanceof$149,500(1)).................104,900

(c) ClubduesforthelocalCountryClub.....................1,750

(d) Federal political contributions . . . . . . . . . . . . .2,500

(e) Donations to registered charities..............................22,500

(f) Property tax with respect to vacant land not being used in the course of the business . . . . . . . . . . . . . . . . . . . . . . 3,000

(g) Life insurance premium with respect to the president (the company is the beneficiary; not required for financing) . . . . .1,950

2) Included in the calculation of Other income and expenses:

(a) Landscaping of ground around new premise . . . . . . . . . 4,800

(b) Fees paid with respect to the investigation of a suitable site for the companysmanufacturingplant .............5,500

(c) Dividends received from taxable Canadian corporation ......................42,800

(d) Gain from the sale of another piece of land, used in the business, sold for $200,000 in March (purchased for $73,800) ..........126,200

(e) Loss on sale of investments held as capital property purchased for $85,000 and soldfor $75,000 ....................10,000

(3) Loss carryforwards from 2018 are:

(a) Non-capitallosses.......................................73,800

(b) Net capital losses (realized in 2013)...................60,000

(1) Maximum CCA has been correctly calculated to include the accelerated incentive investment introduced inthe March 2019 budget.

Required: You have been asked to prepare a schedule reconciling the accounting net income to income for tax purposes and taxable income, . Indicate the appropriate statutory reference for each inclusions or exclusions (i.e. Automobile mileage rates are covered under 18(1)(r) in the Income Tax Act).