Q4. Below is the Statement of Income for PFD (Personal Flotation Devices Inc.) for the year ended of December 31st 2020 prepared in accordance with IFRS.

Revenue: Sales

Service Fees Total Revenues

Cost of Goods Sold: Inventory, beginning of the year Goods purchased Goods available for sale Less, ending inventory

Gross Profit

Expenses: Selling Commissions

Insurance Amortization, building, equipment and goodwill Legal expenses Interest Advertising and promotion Salaries and wages Employee benefits Donations Repairs and maintenance Warranty costs Bad-debt expense

Income before income taxes Additional information:

$250,000 550,000 $800,000 200,000

$ 22,000 8,000

20,000 10,000 5,000 45,000

100,000 22,000 5,000 20,000

8,000 15,000

$785,000 175,000 $960,000

600,000 $360,000

280,000 $ 80,000

1. Ending inventory in addition to being valued at the lower of cost or market has been reduced by a reserve of $6,000 for anticipated further decline.

2. Insurance expense include a $2,000 premium for life insurance on the company President. The proceeds of this policy are payable to the company. The remaining insurance amounts relate to insurance for property damage and liability from their products.

3. Amortization has been calculated in accordance with reasonable estimates of each assets useful life.

4. Included in the legal expenses line item is $6,000 paid as a finders fee for obtaining 10 year long term debt.

5. The advertising and promotion amount includes $10,101 paid to WRIF a Detroit, Michigan based radio station for radio ads. Also included in the account is $4,000 for club memberships in sports related faculties for the purpose of enhancing business contacts.

6. Donations are all paid to registered charities. 7. Actual warranty costs paid on valid warranty claims totalled $6,000 8.CCA for buildings, equipment and goodwill has been correctly calculated as $23,000

Required: 15 Marks Determine and present PDFs income from business for federal income tax purposes. Reference to sections of the Income Tax Act are not required, but your calculation must be supported with an explanation for the adjustments required.