Question 2 (25 Marks) For the year ending December 31, 2020, Mike Miles Marketing Ltd.'s Income Statement, prepared in accordance with generally accepted accounting principles, is as follows: Revenue $970,000 Expenses: Cost of Goods Sold (250,000) Selling & Administrative Costs (140,000) Amortization Expense (120,000) Other Expenses (130,000) (640,000) Income before Taxes 330,000 Income Tax Expenses: Current (80,000) (20,000) (100,000) Future $230,000 Net Income Other Information: 1. The Company spent $ 13,000 during the year on landscaping for its new building. For accounting purposes, this was treated as an asset. The Company will not amortize this balance as it believes the work has an unlimited life. D'Focus English (United States) 2. Selling and Administrative Costs include $ 20,000 in business meals and entertainment. 3. Selling and Administrative Costs include membership fees for several employees in a local golf and country club. These fees total $4,600. 4. Other Expenses include contributions to registered charities of $ 4,300. 5. Other Expenses includes bond discount amortization of $3,600. 6. During 2020, Mike Miles Marketing Ltd. acquired a competing business at a price that included goodwill of $ 80,000. For accounting purposes, there has been no impairment or write-down of the goodwill since its purchase. 7. As the Company expects to issue more shares during 2021, it made a number of amendments to its articles of incorporation in 2020 and included the legal costs in Other Expenses. These costs totaled $10,000. 8. On January 1, 2020, the Company has UCC balances for its tangible assets as follows: Class 1 $400,000 500,000 Class 8 Class 10 40,000 Class 13 65,000 The Class 1 balance relates to a single building acquired in 2000 at a cost of $ 550,000. It is estimated that the value of the land at this time was $ 50,000. On February 1, 2020, this building and the land were sold for $ 612,000. It is estimated that the value of the land is unchanged at $ 50,000. In the accounting records, this real property was carried at $ 507,000, $ 457,000 for the building and $ 50,000 for the land. The resulting gain on the building is included in the accounting revenues. The old building was replaced on February 15, 2020 with a new building acquired at a cost of $ 683,000 of which $ 60,000 is allocated to land. The Company chose not to put the new building into a separate Class 1; thus, it does not qualify for the 6 percent CCA rate. No elections are made with respect to the replacement of the building. There are no dispositions of Class 8 assets during the year. However, there are acquisitions in the total amount of $ 120,000. FOCUS As the Company has decided to lease all of its vehicles in the future, all of the assets in Class 10 are sold during the year. The capital cost of these assets was $ 90,000 and the proceeds of disposition amounted to $ 35,000. The net book value of these assets was $ 52,000 and the resulting accounting loss of $ 17,000 was included in Other Expenses. The Class 13 balance relates to a single lease that commenced on January 1, 2018. The lease has an initial term of seven years, with two successive options to renew for three years each. Expenditures on this leasehold were $50,000 in 2018 and $ 27,000 in 2019. There were no further expenditures in 2020. The write-off of these expenditures for accounting purposes is included in Amortization Expense. 9. Other Expenses includes interest on late income tax instalments of $ 800 and on late municipal tax payments of $ 300. 10. Mike Miles Marketing Ltd. has always deducted the maximum CCA allowable in each year of operation. Required: Determine Mike Miles Marketing Ltd.'s 2020 minimum Net Income for Tax Purposes. In addition, calculate the January 1, 2021 UCC for all of Mike Miles Marketing Ltd.'s CCA classes. Question 2 (25 Marks) For the year ending December 31, 2020, Mike Miles Marketing Ltd.'s Income Statement, prepared in accordance with generally accepted accounting principles, is as follows: Revenue $970,000 Expenses: Cost of Goods Sold (250,000) Selling & Administrative Costs (140,000) Amortization Expense (120,000) Other Expenses (130,000) (640,000) Income before Taxes 330,000 Income Tax Expenses: Current (80,000) (20,000) (100,000) Future $230,000 Net Income Other Information: 1. The Company spent $ 13,000 during the year on landscaping for its new building. For accounting purposes, this was treated as an asset. The Company will not amortize this balance as it believes the work has an unlimited life. D'Focus English (United States) 2. Selling and Administrative Costs include $ 20,000 in business meals and entertainment. 3. Selling and Administrative Costs include membership fees for several employees in a local golf and country club. These fees total $4,600. 4. Other Expenses include contributions to registered charities of $ 4,300. 5. Other Expenses includes bond discount amortization of $3,600. 6. During 2020, Mike Miles Marketing Ltd. acquired a competing business at a price that included goodwill of $ 80,000. For accounting purposes, there has been no impairment or write-down of the goodwill since its purchase. 7. As the Company expects to issue more shares during 2021, it made a number of amendments to its articles of incorporation in 2020 and included the legal costs in Other Expenses. These costs totaled $10,000. 8. On January 1, 2020, the Company has UCC balances for its tangible assets as follows: Class 1 $400,000 500,000 Class 8 Class 10 40,000 Class 13 65,000 The Class 1 balance relates to a single building acquired in 2000 at a cost of $ 550,000. It is estimated that the value of the land at this time was $ 50,000. On February 1, 2020, this building and the land were sold for $ 612,000. It is estimated that the value of the land is unchanged at $ 50,000. In the accounting records, this real property was carried at $ 507,000, $ 457,000 for the building and $ 50,000 for the land. The resulting gain on the building is included in the accounting revenues. The old building was replaced on February 15, 2020 with a new building acquired at a cost of $ 683,000 of which $ 60,000 is allocated to land. The Company chose not to put the new building into a separate Class 1; thus, it does not qualify for the 6 percent CCA rate. No elections are made with respect to the replacement of the building. There are no dispositions of Class 8 assets during the year. However, there are acquisitions in the total amount of $ 120,000. FOCUS As the Company has decided to lease all of its vehicles in the future, all of the assets in Class 10 are sold during the year. The capital cost of these assets was $ 90,000 and the proceeds of disposition amounted to $ 35,000. The net book value of these assets was $ 52,000 and the resulting accounting loss of $ 17,000 was included in Other Expenses. The Class 13 balance relates to a single lease that commenced on January 1, 2018. The lease has an initial term of seven years, with two successive options to renew for three years each. Expenditures on this leasehold were $50,000 in 2018 and $ 27,000 in 2019. There were no further expenditures in 2020. The write-off of these expenditures for accounting purposes is included in Amortization Expense. 9. Other Expenses includes interest on late income tax instalments of $ 800 and on late municipal tax payments of $ 300. 10. Mike Miles Marketing Ltd. has always deducted the maximum CCA allowable in each year of operation. Required: Determine Mike Miles Marketing Ltd.'s 2020 minimum Net Income for Tax Purposes. In addition, calculate the January 1, 2021 UCC for all of Mike Miles Marketing Ltd.'s CCA classes