The following information is taken from the financial statements and audit working papers of Old Bridge Asset Sales Inc. (OASI) for its fiscal year ended December 31, 2019.

Old Bridge Asset Sales Inc.

Condensed Unaudited Income Statement

For the Year Ended December 31, 2019

Sales		$16,650,000
Cost of goods sold		(14,050,000)
Gross profit		$ 2,600,000
Selling expenses	$975,000
General and administrative expenses	195,000	(1,170,000)
Net income before provision for income taxes		$ 1,430,000
Provision for income taxes current	$220,000
future	310,000	(530,000)
Net income after tax		$ 900,000

Included in sales for the year is a deposit of $8,200 received from a customer for goods that will be delivered next year.

The following items were deducted in arriving at the above net income:

1. During the year, a warehouse worker managed to remove valuable inventory worth $8,000 during the night shift by taking it out in his lunch box.

2. Late in the year, it became apparent that during the next year new competitive products would come on the market which would drive the price of OASIs products down. They expect this decline to take place in about six months. As a result, they decided to set up a reserve for a decline in the inventory value in the amount of $17,000. They have never set up this kind of reserve before.

3. Because OASIs products come back for repair under their warranty program, they set up a reserve for this expense on their financial statements. Last year the reserve was $76,000. This year they increased the reserve to $97,000.

4. Charitable donations were made in the amount of $9,000.

5. Golf club membership fees in the amount of $2,600 were paid for the sales manager who used the club regularly to close sales.

6. The sales manager incurred expenses related to meals and entertainment at the golf club in the amount of $2,300.

7. Management bonuses of $96,000 were accrued at December 31, 2019 ($35,000 was not paid until June 30, 2020 due to lack of sufficient funds).

8. The December holiday banquet for the employees cost $15,000.

9. OASI had a dispute with one of its major suppliers over the use of the supplier's product. As a result of a court decision, the supplier was awarded damages for breach of contract in the amount of $38,000.

10. In order to raise money for expansion, the company mortgaged the real estate it used in the business. It incurred accounting fees of $5,000 and appraisal fees of $2,000 related to this financing. The mortgage has a 10-year term and a 30-year amortization period.

11. A number of years ago, the company issued a bond at a discount. They have been amortizing this discount at the rate of $7,000 per year ever since, including this year.

12. During the year, the company bought the shares of another company. In completing this transaction, legal fees of $8,500 were incurred.

13. During the year, they borrowed to buy new equipment. The interest expense related to this was $23,000.

14. Instead of borrowing money at the bank, the company decided to pay their income tax instalments late. This resulted in an interest charge from the Canada Revenue Agency in the amount of $390.

15. A life insurance policy was taken out on the president's life in order to provide funding for the company in the event of his death. Life insurance premiums on this policy amounted to $4,600.

16. Business interruption insurance premiums of $3,300 were paid to protect the company in the event a fire forced them to close for a period of time.

17. Computer software costing $750 related to word processing was expensed because they always bought the upgrades each year.

18. Amortization expense on the fixed assets was $86,000.

19. Capital cost allowance amount is 189,475

Required:

1. Based on the foregoing information, compute the minimum income from business for tax purposes for Old Bridge Asset Sales Inc. in respect of its 2019 fiscal year. (25 Marks)
2. In addition, briefly comment on the items not included in your calculation of income from business. (5 Marks)