problem 14 You have been assigned to the audit team for B.B. JAMS Ltd, one of your significant clients. Below the income statement prepared by the company's accountant for the December 31, 2022, year end. Notes: Through various discussions with the accountant, you have been able to determine that the following information has been recorded in the financial statements: (1) JAMS had a number of items of inventory that did not sell well in the current year. For accounting purposes, the accountant has recorded a reserve for inventory obsolescence. The reserve was calculated based on the carrying value of any inventory item that had not had a sale in the last 180 days. The reserve at year end was $1,285,000. (2) JAMS provides insurance for employees and paid the following amounts to Nat Insurance Company during the year: JAMS is the beneficiary of the policies on the president and vice-president. On June 1, 2022, JAl renegotiated its bank debt, and due to the ever-increasing responsibilities of the president, the ba 100 . iwaltaded in geseral and administrative expetsy. - Ne of the a auses wre pait as be yeat (6) The salkries and bentefis account shows contributions for certain erriplosees to the company/4 regatered pension plan. The contributions were not actuatly made until March 31, 2023, The pensibe plan w. Mifined contribution (money. jarchase) plan. The cotngany matches the emplogees to envolopees orer the ske of 60 . In order to provide employees with the time required to assess the offer, the deadine for accepting the package has been set at, February 15,2903 . While no formal replies were received is of December 31,2002 , the personnel manager anticipates a high acceptance rate. Sie expects that the costs associated with the packiges will be $672,000. This cost has been accrued in the 2082 linancial statements. (8) The following information was taken from the arious selling expense accounts: on the sale of various fixed assetis of 395,900. certain conting the year, the coimpary had cash on hand for a short period of time due to the timing of Other lnformation: (11) The accountians has calculated that JAMS is entitled to claim capital cost allowance of \$5,885,000 in 2622 . You twve confirmed that this calculation is cortect. (12) In reviewitg the income tex ussesaments, you noted that JAMS had been changed interest ol 4,850 Based on the information that you have obtained, your manager has asked you to calculate the income from business for tax purposes for JAMS for December 31, 2022. He also wants you to show all calculations whether or not they seem relevant to the final answer and comment on all items omitted from the calculation
