Paul Poti, is the sole proprietor of Poti Enterprises, a small retail shop selling widgets located in Edmonton, AB. The shop has been in operation for several years. Paul provides you with the Statement of Income for the proprietorship for December 31 of the current year: Pati Enterprises Statement of Income for the Year Ended December 31 (Current Year) Item Amount Amount Sales $600,000 Cost of sales: Opening inventory $50,000 Purchases 250,000 300,000 Closing inventory 60,000 240,000 Gross profit 360,000 Expenses: Accounting and Legal (Note 2) 4,000 Advertising and promotion (Note 3) 5,000 Depreciation (Note 4) 26,000 Automobile expenses 7,000 Bad debts (Note 5) 4,000 Insurance (Note 6) 7,000 Interest 19,000 Office expenses (Note 7) 12,000 Rent 36,000 Wages and benefits (Note 8) 110,000 230,000 Net income for the year: $130,000 Notes to the above statement of income: 1. Poti, Enterprises is a proprietorship operated by Paul Roti. 2. Accounting and legal include legal fees related to Paul's dispute with regard to a personal car accident, in the amount of $2,000. 3. Advertising and promotion include "Meals and Entertainment" costs in the amount of $4,250. 4. Information for capital cost allowance (CCA) purposes-the undepreciated capital cost (UCC) at December 31 of the prior year was as follows: Class 8 (Office & General Equipment) $45,125 Class 10 (Automotive Equipment) $44,875 5. The company has set up an allowance for doubtful accounts based on a review of the Accounts Receivable on December 31 of the current year. This is a procedure that the proprietorship follows every year. 6. Insurance includes life insurance premiums for Paul Poti, in the amount of $3,000. This insurance is required as collateral for the business bank loan. 7. Office expenses include the purchase of a computer, on January 15 of the current year, for $5,000. 8. Wages and benefits include the club dues/membership fees paid to the Royal Oak Club in the amount of $6,000. The club dues are paid for the five managers who take clients to the Royal Oak Club on a regular basis for business purposes. Answer the following: 1. Calculate the net business income for the proprietorship Poti Enterprises for the current year. 2. With reference to Section 3 of the ITA, how is the business income (loss) reported for the proprietorship? 3. Would your response to #2 above be different if Pati, Enterprises was incorporated? 4. Since Pati Enterprises is a profitable business, Paul Poti, is assessing the different business structures for unincorporated businesses. Describe the tax reporting requirements for proprietorships, partnerships, and joint ventures. Paul Poti, is the sole proprietor of Poti Enterprises, a small retail shop selling widgets located in Edmonton, AB. The shop has been in operation for several years. Paul provides you with the Statement of Income for the proprietorship for December 31 of the current year: Pati Enterprises Statement of Income for the Year Ended December 31 (Current Year) Item Amount Amount Sales $600,000 Cost of sales: Opening inventory $50,000 Purchases 250,000 300,000 Closing inventory 60,000 240,000 Gross profit 360,000 Expenses: Accounting and Legal (Note 2) 4,000 Advertising and promotion (Note 3) 5,000 Depreciation (Note 4) 26,000 Automobile expenses 7,000 Bad debts (Note 5) 4,000 Insurance (Note 6) 7,000 Interest 19,000 Office expenses (Note 7) 12,000 Rent 36,000 Wages and benefits (Note 8) 110,000 230,000 Net income for the year: $130,000 Notes to the above statement of income: 1. Poti, Enterprises is a proprietorship operated by Paul Roti. 2. Accounting and legal include legal fees related to Paul's dispute with regard to a personal car accident, in the amount of $2,000. 3. Advertising and promotion include "Meals and Entertainment" costs in the amount of $4,250. 4. Information for capital cost allowance (CCA) purposes-the undepreciated capital cost (UCC) at December 31 of the prior year was as follows: Class 8 (Office & General Equipment) $45,125 Class 10 (Automotive Equipment) $44,875 5. The company has set up an allowance for doubtful accounts based on a review of the Accounts Receivable on December 31 of the current year. This is a procedure that the proprietorship follows every year. 6. Insurance includes life insurance premiums for Paul Poti, in the amount of $3,000. This insurance is required as collateral for the business bank loan. 7. Office expenses include the purchase of a computer, on January 15 of the current year, for $5,000. 8. Wages and benefits include the club dues/membership fees paid to the Royal Oak Club in the amount of $6,000. The club dues are paid for the five managers who take clients to the Royal Oak Club on a regular basis for business purposes. Answer the following: 1. Calculate the net business income for the proprietorship Poti Enterprises for the current year. 2. With reference to Section 3 of the ITA, how is the business income (loss) reported for the proprietorship? 3. Would your response to #2 above be different if Pati, Enterprises was incorporated? 4. Since Pati Enterprises is a profitable business, Paul Poti, is assessing the different business structures for unincorporated businesses. Describe the tax reporting requirements for proprietorships, partnerships, and joint ventures