Question

The income statement has been prepared by the accountant of Aurora Marketplace Inc.$($Aurora$)$ for the current year ending December $31,2023$ is as follow:

Sales $6,000,000$

Cost of goods sold $2,500,000$

Gross Profit $3,500,000$

Operating Expenses

General and administrative expense $($Note $1)(551,500)$

Meal and Entertainment $($Note $2)(34,500)$

Insurance expense $($Note $3)(10,400)$

Interest expense $($ Note $4)(15,150)$

Computer and software $(4,500)$

Lease expense $(80,000)$

Leasehold Improvement $($ Note $6)(48,000)$

Amortization expense $($Note $6)(150,000)(894,050)$

Operating Income $2,605,950$

Other Income and Expenses:

Eligible Dividends $($ investments in a Canadian company$)2,000$

Gain on sale of asset $18,000$

Loss on disposal of asset $(5,000)$

Political contribution $(1,350)$

Income before income tax expense $2,619,600$

Income tax expense $(170,000)$

Net Income $2,449,600$

Notes:

$1.$ General and administrative expense include:

Fines for speeding tickets incurred by the salesperson $1,500$

Payroll Expenses $500,000$

Accrued bonus $50,000$

$($Accrued August $1,2023,$ paid March $15,2024)$

$2.$ Meals and entertainment expenses:

Memberships at golf club for salespeople $6,000$

Meals while enteretaining clients $18,500$

Christmas party for all employees $($accommodation $$2,000$ and meals $$5,000)7,000$

Johnny attended a three$-$day business conference; meals were provided, but no dollar amount was identified $3,000$

$3.$ The annual insurance premiums total $$400$ for Johnny, the sole shareholder's Aurora life insurance plan, and $$10,000$ for the business plan, aimed at safeguarding the company's assets.

$4.$ Interest payment includes:

Interest paid on loan borrowed from the bank $15,000$

Interest paid to Telus due to late payment of January's cell phone bill $150$

$6.$ Aurora follows a policy to claim the maximum CCA on all depreciable properties. The UCC balances as of January $1,2023,$ are as follows:

Class $86,000$

Class $10\mathrm{.}18,747$

Class $1315,400$

Class $1468,000$

a$.$ In $2023,$ Aurora replaced all of its old furniture and fixtures with new and modern furniture. The old furniture and fixtures, with a capital cost of $$18,000,$ were disposed of in the landfill. Their carrying value for accounting purposes was $$5,000.$ The new furniture and fixtures have a capital cost of $$30,000.$

b$.$ In $2019,$ the company acquired a $$60,000$ Class $10\mathrm{.}1$ vehicle for Johnny for business use. However, in July, Johnny transitioned to a role focused on office management and overseeing operations. Due to the vehicle's frequent repair needs, Aurora decided to sell it for $$12,000.$ Since then, no replacement vehicle has been purchased for Johnny.

c$.$ The company acquired a non$-$electric passenger vehicle at a cost of $$50,000$ for the exclusive use of one of its salespersons for business$-$related activities.

d$.$ Aurora leases the office building for $$80,000$ per year. The lease was negotiated on January $1,2020,$ and has an original lease term of five years. The company made $$30,000$ of leasehold improvements in $2020$ immediately after signing the lease. No further leasehold improvements were made until the current year $2023.$

e$.$ During the year, a limited life licence to sell costumes based on a popular theme park was sold for $$98,000.$ The original cost of this licence was $$95,000$ and its carrying value at the time of sale was $$80,000.$ The licence was the only property in class $14.$

f$.$ "Other properties purchases in $2023$ are as follows:

$-$ New computer and system software $$1,800$

$-$ Applications software $2,700"$

Required:

PART I : $(21$ points $)$

Use an Excel workbook to prepare the year $2023$ Capital Cost Allowance $($CCA$)$ schedule and calculate UCC $($Undepreciated Capital Cost$)$ balance for Aurora Marketplace Inc.

PART II: $(20$ points$)$

"Use an Excel workbook to prepare a reconciliation schedule, calculate the minimum net income for the $2023$ taxation year for Aurora Marketplace Inc., and provide a brief description of the items that are not included in your calculation.

$"$