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POTI ENTERPRISES LTD . STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 3 1 ( current year ) SALES $ 6 0 0 , 0
POTI ENTERPRISES LTD STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER current year
SALES $
COST OF SALES: $
OPENING INVENTORY
PURCHASES
CLOSING INVENTORY
GROSS PROFIT
EXPENSES:
Accounting & Legal Note
Advertising & promotion Note
Depreciation Note
Automobile expenses
Bad debts Note
Insurance Note
Interest
Office expenses Note
Rent
Wages & Benefits Note
NET INCOME FOR THE YEAR $
NOTES TO THE ABOVE STATEMENT OF INCOME:
Poti Enterprises Ltd is a small business corporation operated by the sole shareholder, Paul Poti
Accounting and legal include legal fees related to Pauls dispute in regards to a personal car accident, in the amount of $
Advertising and promotion include Meals and Entertainment costs in the amount of $
Information for Capital Cost Allowance CCA purposes the Undepreciated Capital Cost UCC at December of the prior year was as follows:
Class Office & General Equipment $
Class Automotive Equipment $
The company has set up an allowance for doubtful accounts based on a review of the Accounts Receivable at December of the current year. This is a procedure that the proprietorship follows every year.
Insurance includes life insurance premiums for Paul Poti in the amount of $ This life insurance policy is required as collateral for the business bank loan.
Office expenses include the purchase of a computer, on January of the current year, for $
Wages and benefits include the club duesmembership fees paid to the Royal Oak Club in the amount of $ The club dues are paid for the five managers who take clients to the Royal Oak Club on a regular basis for business purposes.
Require: Answer the following questions:
Calculate the NET BUSINESS INCOME for Poti Enterprises Ltd for the current year.
With reference to Section of the ITA, how is the business income loss reported for the corporation?
Paul Poti has asked why certain business deductions are allowed while others are not. Describe the tax implications of ITA and ITA to Paul Poti. You should also explain the tax implications of ITA and any tax planning opportunities that should be considered.
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