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M Martinez Power Tool Corporation Ltd. has carried on business in Canada since its incorporation under the Canada Business Corporations Act in 1972. Its net
M Martinez Power Tool Corporation Ltd. has carried on business in Canada since its incorporation under the Canada Business Corporations Act in 1972. Its net income for the year ended 2007, as determined under generally accepted accounting principles, is as follows: Martinez Power Tool Corporation Limited INCOME STATEMENT For the year ended December 31 , 2007 Sales $8,500,000 Cost of goods sold: Inventory, January 1, 2007 $ 800,000 Purchases 7,000,000 7,800,000 Inventory, December 31, 2007 600,000 COGS (7,200,000) Gross Profit 1,300,000 Selling expenses 500,000 General and administrative expenses 100,000 (600,000) 700,000 Other income 60,000 760,000 Provision for income taxes (300,000) Net Income $ 460,000 Included in the summary of the financial results of Martinez Power Tool Corporation Ltd. are the following details: 1. Closing inventory was written down, for a possible future impairment of FMV below cost, but $40,000 in 2007 and $25,000 in 2006. 2. Selling expenses included: Meals and entertainment $11,500 Golf club memberships 10,000 Charitable donations 5,000 Bonus declared by unpaid 20,000 Provincial payroll taxes 18,000
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