the following income statement was prepared in accordance with GAAP

Question 1. Business Income Chapter 6 ( 58 pts ) The following income statement was prepared in accordance with GAAP. Westwood Station Caffe' Income Statement for the year ended December 31, 201X Sales $121,000 Cost of sales (average cost) 42.350 Gross Profit $78,650 Expenses: Entertainment (note a) $ 2,200 Amortization (note b) 4,000 Franchise fees (note c) 6,000 Professional fees 1,500 Interest expenses (note d) 2,800 Charitable donations 550 Wages and salaries (note e) 26,000 43,050 Other income: Gain on disposal of land 3,800 Net Income before taxes $39.400Notes: 11') d} Entertaimnent expenses includes: Meals with customers and potential customers [retail price] $350 Suppers for the owner when he stayed later during busy tim during the year $3M Golf dues for owner so he can entertain clients on the golf course $l5 The maxintum capital cost allowance for tax purposes is $5.251] The franchise is a six year limited life franchise and the franchise fees includes: - Company purchased Franchise on April 1 20 II for $42M - Company pays franchise fees as a percentage based on sales, the cost for the current year is $1800 Interest expense includes: - interest expense on the mortgage for the building HID-D - CRA penalty interest on late withholding tax payment Wages and salaries include: - the cost of Christmas gifts of $150 to each of the 6 employees. The company did not record this $151} on any of the employee's T4 - total bonuses of $2500 payable on July 14'11 of the next year. It) years ago1 the owner had purchased a comer lot on Main St and Young St. He was holding the lot as speculation for future expansion of his business. This year he decided to sell this parcel of land for $5 and it created a gain which he included in business income. Selling price of land was S; and the original cost was $12. Required: 1. Compute the corporation's net inoome from a business for tax pmposes for 201K. a. Briey explain why you are making the adjustments you are making. h. Also, if you do not use any of the items as listed in the problem, briey explain why. 2. Show all your work for full marks