Task #2 Bruce also requires a calculation of taxable income for the most recent year ended December 31, 2020. The calculation should be prepared in Excel. He has also requested that you prepare the year-end journal entry for taxes payable using a marginal rate of 14% on income less than the small business deduction limit. Bruce has provided you with the draft statement of income and retained earnings (Appendix il) and additional information you will need (Appendix III). Your response should be no longer than half a page, excluding any Excel files. Note: Unless otherwise noted, use the tax rates and tax regulations pertaining to the most recent calendar year end to your module. For instance, if you are writing Core 1 in May 2021, use the 2020 tax rates and regulations (the most recent year end being December 2020). If you are writing Core 1 in January 2022, use the 2021 tax rates and regulations. Appendix 11 Quality Cabinets Inc. Statement of income and retained earnings For the period ended December 31 (Draft) 2020 2019 (Draft) (Audited) Sales $ 8,959,800 $ 8,834,000 Cost of sales 5.939,648 6.129.709 Gross profit 3,020,152 2,704,291 Expenses: Advertising and promotion 357,900 266,500 Amortization 219,163 166,584 Automobile 140,800 102,600 Bad debts 17,250 19.110 Donations 1,200 1,000 Dues and fees 7,500 Insurance 69,600 57,200 Interest and bank charges 119,203 46,600 Office 101,200 108,700 Professional fees 67.700 34.800 Property taxes 44,700 40,900 Repairs and maintenance 207,100 155,100 Rent expense 84,654 Salaries and wages 1,160,460 1,175,600 Travel 117,666 103,900 Utilities 67,600 70,200 Warranty 72.059 69.482 Income before taxes 164,397 286,015 Income taxes (Note 1) 70.000 76.754 Net income 94,397 209,261 Retained earnings, opening 2,561,214 2,360,953 Dividends 48.750 9.000 Retained earnings, closing $ 2,606,861 $ 2.561,214 Note 1: Current-year income taxes represent income tax instalments remitted. Appendix III Tax information Prepared by Bruce MacDonald 1. Information regarding property, plant, and equipment at December 31: Additions to property, plant, and equipment: Manufacturing equipment $ 313,888 Delivery trucks 169,370 Office equipment 14.230 Computer hardware 12,110 Computer software 13,670 Leased asset 1.068,067 $ 1.591 335 All software additions this year were application software. Quality's building was purchased five years ago. At that time, Quality did not make an election to place the building in a separate Class 1 at the accelerated rate of 10% $325,625 of amortization is included in current-year cost of sales in the income statement Lease payments related to the capitalized lease asset for the year amounted to $98,000 and interest on the lease liability (included in interest and bank charges) was $48,503 Lease payments under the provincial land agreement totalled $36,000 and were included in rent expense. 2. Undepreciated capital cost balances at the beginning of the year were as follows: Class 1 $ 416,400 Class 8 131,800 Class 10 76,300 Class 12 15,300 Class 50 4.360 644.160 3. Bruce is a member of the Predator Ridge Golf and Country Club (PRGCC), where he entertains many of the company's customers and suppliers. Payments to PRGCC during the year are included in advertising and promotion and consisted of the following: Monthly dues: $8,280 (total for the year) Green fees: $4,360 Restaurant and beverage costs: $10,290
