Mockingjay Inc. is a Canadian$-$controlled private corporation located in Ottawa and

incorporated under the federal law. Following is the income statement of Mockingjay Inc., as

presented in its year$-$end financial statements $($including losses$/$gains on sale of assets$)$:

Mockingjay Inc.

Income Statement

For the year ended December $31,$

$20$X$1$

Revenues and gains on sale of assets

$20$X$1$

$ $600,000$

$20$X$0$

$ $450,000$

Expenses and losses on sale of assets $(300,000)(205,000)$

Amortization $(40,000)(30,000)$

Net income $($loss$)$ $ $260,000$ $ $215,000$

Notes:

$1)$ The following items are included in administrative and operating expenses for $20$X$1$:

$-$ $$6,000$ in charitable donations to a registered charity;

$-$ $$9,000$ in business meals and entertainment

$-$ Revenues$/$expenses included the gain and$/$or loss on disposition of assets $($see note $3).$

$2)$ The following items are included in the revenues for $20$x$1$:

$-$ $$18,000$ Interest income on long$-$term investments

$-$ $$8,000$ Dividends from various public Canadian company investments $($Mockingjay

owns less than $1\%$ of each$)$

$3)$ On January $1,20$X$1,$ the UCC balances, purchases and disposition for the various

classes of assets owned by the business are as follows:

UCC Beginning

Class Balance Purchases Disposition

$1$ $$440,000$ $$500,000$ note $2$A

$8$ $$10,000$ $$25,000$ note $2$B

$10$ $$30,000$ $$8,000$ note $2$C

$13$ $$25,500$ note $2$D

Page $|3$

Additional information $($notes$)$:

$2$A$)$ On January $1,20$X$1,$ the business disposed of its sole building:

$-$ proceeds of disposition $=$ $$500,000$

$-$ its net book value on January $1,20$X$1$ was $$420,000$

$-$ its original cost was $$460,000$ a few years ago

$2$B$)$ New office equipment was purchased for $$25,000$ on April $19,20$X$1.$

$2$C$)$ On May $1,20$X$1,$ the business disposed of its only class $10$ asset:

$-$ proceeds of disposition $=$ $$8,000$

$-$ net book value on May $1,20$X$1$ was $$25,000$

$-$ original cost was $$40,000$ a few years ago

$2$D$)$ The leasehold improvements original cost $$30,000$ when Mockingjay leased its retail

space $2$ years ago. The lease of the retail space was for $5$ years with a $5-$year extension.

$4)$ All income is earned in the province where the corporation is located.

$5)$ At the end of $20$X$0,$ Mockingjay Inc. had the following tax account balances:

$-$ Refundable dividend tax on hand $($RDTOH$)$ $$8,745$

$-$ Dividend refund in $20$X$0$ $$0$

$6)$ No tax instalments have been paid for taxation year $20$X$1.$

$7)$ Mockingjay Inc. paid out a dividend of $$30,000$ to its sole shareholder during the year.

Required:

Calculate $20$X$1$ minimum Net Income, Taxable Income and federal income tax payable $($under

Part I and other Parts of the Income Tax Act$)$ of Mockingjay Inc. Ignore Provincial Taxes.

Assume that Mockingjay Inc. had active business income $($not manufacturing activity$)$ during the

year. As part of your solution, provide a complete analysis of all of the preceding items,

indicating the adjustments necessary or the reason no adjustment is necessary for each item.