TapeCreat Inc. is a retailer of highly specialized clothing that opened for business on January 2, 2016 in a leased store in a strip mall. A condensed income statement for TapeCreat Inc. for its year, ended December 31, 2019, shows the following: TapeCreat Inc. Condensed Income Statement For the Year Ended December 31, 2019 Unaudited (000s) Sales $ 1,932 Cost of sales (1,439) Gross profit 493 General and administrative expense (279) Other (54) Income before income taxes 160 Income tax expense (13) Net income $ 147 Notes: An analysis of the cost of sales account revealed that the inventory is valued at average cost within each of the different styles carried. Since the owner is still learning what has appeal, a "mark-down rack" has become a common fixture at the back of the store. The tagged prices of the mark-downs are less than their costs, at December 31, 2019 the total of the mark-downs was $700. This difference was recorded in the financial statements and included in Cost of Sales. General and administrative expenses include the following (amongst others): Contributions to a registered pension plan made monthly for the two key employees, expensed by the corporation's accountant, were as follows: Registered Employment Pension Plan compensation President and $8,500 $ 90,000 CEO Store manager $7,200 80,000 The contributions above were matched by equal contributions made by the employee. The company paid the following amounts to Sun Insurance Limited during the year: Group term life insurance for the four full-time employees $2,200 $200,000 term life insurance policy on the president, which was included in the "Insurance" expense account 900 $3,100 The term life insurance policy on the president was assigned to the bank as collateral for a $500,000 loan from January 1 through August 30, 2019. The loan was repaid on September 1, 2019 in favour of an operating line of credit. After August 30th, the life insurance policy reverted to the president's wife as the beneficiary. The following selected information was taken from the "Promotions" account: $ 4,500 2,500 2,800 2,000 Charitable donation to the local United Way Political contributions to local politicians Hockey tickets given to staff as Christmas gifts Meals and entertainment incurred by the owner while negotiating with suppliers Two customer parties and one staff (staff make up about one- third of the attendees at the Customer parties. Staff party was staff only - no outside guests. Each party cost $4,000; all employees invited to each event) Account total 12,000 $ 25,600 The company's "Professional expense" account included the following legal and accounting fees: Accounting fees for year-end work and monthly bookkeeping $15,000 Legal fees incurred on the purchase of capital assets during the year 2,000 Legal and accounting fees incurred in connection with negotiations for a line of credit at the bank 4,000 Account total $21,000 In 2017, the company had incurred fees of $1,000 to issue shares to the president and CEO. Other expenses deducted in the financial accounting computation of income include: $47,000 7,500 400 Depreciation and amortization Interest on the loan and operating line of credit Interest on insufficient income tax instalments Purchase of additional store fixtures bought at a going-out-of- business sale; expensed due to their small dollar amount Damages under a breach of contract suit initiated by a supplier Total 1,500 1,700 $58,100 You have correctly determined that Tape Creat Inc. is entitled to a $50,000 capital cost allowance amount claim in 2019. Required: Based on the foregoing information, compute the income from business for tax purposes for TapeCreat Inc. for its 2019 fiscal year. Show all calculations and, for each item mentioned above but not included in your reconciliation, state why it was or was not considered in your calculation. TapeCreat Inc. is a retailer of highly specialized clothing that opened for business on January 2, 2016 in a leased store in a strip mall. A condensed income statement for TapeCreat Inc. for its year, ended December 31, 2019, shows the following: TapeCreat Inc. Condensed Income Statement For the Year Ended December 31, 2019 Unaudited (000s) Sales $ 1,932 Cost of sales (1,439) Gross profit 493 General and administrative expense (279) Other (54) Income before income taxes 160 Income tax expense (13) Net income $ 147 Notes: An analysis of the cost of sales account revealed that the inventory is valued at average cost within each of the different styles carried. Since the owner is still learning what has appeal, a "mark-down rack" has become a common fixture at the back of the store. The tagged prices of the mark-downs are less than their costs, at December 31, 2019 the total of the mark-downs was $700. This difference was recorded in the financial statements and included in Cost of Sales. General and administrative expenses include the following (amongst others): Contributions to a registered pension plan made monthly for the two key employees, expensed by the corporation's accountant, were as follows: Registered Employment Pension Plan compensation President and $8,500 $ 90,000 CEO Store manager $7,200 80,000 The contributions above were matched by equal contributions made by the employee. The company paid the following amounts to Sun Insurance Limited during the year: Group term life insurance for the four full-time employees $2,200 $200,000 term life insurance policy on the president, which was included in the "Insurance" expense account 900 $3,100 The term life insurance policy on the president was assigned to the bank as collateral for a $500,000 loan from January 1 through August 30, 2019. The loan was repaid on September 1, 2019 in favour of an operating line of credit. After August 30th, the life insurance policy reverted to the president's wife as the beneficiary. The following selected information was taken from the "Promotions" account: $ 4,500 2,500 2,800 2,000 Charitable donation to the local United Way Political contributions to local politicians Hockey tickets given to staff as Christmas gifts Meals and entertainment incurred by the owner while negotiating with suppliers Two customer parties and one staff (staff make up about one- third of the attendees at the Customer parties. Staff party was staff only - no outside guests. Each party cost $4,000; all employees invited to each event) Account total 12,000 $ 25,600 The company's "Professional expense" account included the following legal and accounting fees: Accounting fees for year-end work and monthly bookkeeping $15,000 Legal fees incurred on the purchase of capital assets during the year 2,000 Legal and accounting fees incurred in connection with negotiations for a line of credit at the bank 4,000 Account total $21,000 In 2017, the company had incurred fees of $1,000 to issue shares to the president and CEO. Other expenses deducted in the financial accounting computation of income include: $47,000 7,500 400 Depreciation and amortization Interest on the loan and operating line of credit Interest on insufficient income tax instalments Purchase of additional store fixtures bought at a going-out-of- business sale; expensed due to their small dollar amount Damages under a breach of contract suit initiated by a supplier Total 1,500 1,700 $58,100 You have correctly determined that Tape Creat Inc. is entitled to a $50,000 capital cost allowance amount claim in 2019. Required: Based on the foregoing information, compute the income from business for tax purposes for TapeCreat Inc. for its 2019 fiscal year. Show all calculations and, for each item mentioned above but not included in your reconciliation, state why it was or was not considered in your calculation