Urgent... Please help

X Ltd is a retailer of snowmobiles that opened for business on May 1,2019, in a leased store in a strip mall. A condensed income statement for X for its full year ended December 31^st. 2021, shows the following:-

X Ltd.

Condensed Income Statement

For year ended December 31^st. 2021

(000s)

Sales.$1,832

Cost of Sales( Note i)...(.1,439)

Gross Profit. 393

General and administrative expense(Note ii).. ( 279)

Other Expenses.. 54)

Income before taxes 60

Income tax expense. (13)

Net Income. 47

Additional Information:-

i. An analysis of the cost of sales account revealed that the inventory is valued at average cost within each of the different models carried. Since the owner is still learning what models have appeal a mark down rack has become a common feature at the back of the store. The tagged prices of the mark downs are less than their costs at December 31^st. 2021 by $700. The difference has not been recorded in the financial statements.

Cost of goods sold includes a charge of $1,800, to set up an allowance for returns(1.1%) of sales that are not subsequently saleable at full retail price. No such allowance was recorded last year-end because the company only discovered that the allowance was necessary this year.

ii. General and Administrative Expenses include the following:-

a. Contributions to a registered pension plan made monthly for the two key employees, expensed by the corporations accountant were as follows:-

Registered Pension Plan..Employment Compensation

President and CEO..$16,000..........................$140,0000

Store Manager 8,000............................. 80,000

The pension plan is a defined contribution (money purchase) plan. The contributions are matched by equal contributions made by the employee.

The Company paid the following amounts to the Manulife Insurance Limited during the year:-

-Group term life insurance for four employees..$1,200

-$200,000 term life insurance policy on the president, which was :-

Included in the insurance expense account 600

$1,800

X is the beneficiary of the insurance policy on the president. 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 31^st. 2021. The loan was repaid on September 1,2021, in favor of an operating line of credit.

b. The following selected information was taken from the Promotions account:-

-Charitable donations to the United Way.$4,500

-Political contributions to local politicians 1,500

-Hockey tickets given to suppliers as Xmas gifts.. 1,800

-Meals and entertainment incurred by the owner while:-

Negotiating with suppliers.. 2,000

Club fees incurred wile entertaining suppliers 1,000

Two summer and one Xmas parties.. 12,000

iii. The Companys Professional Expense account included the following legal and accounting fees:-

Accounting fees for year-end work and monthly book keeping..$10,000

Legal fees incurred on the purchase of capital assets during the year..$1,000

Legal and accounting fees incurred in connection with negotiations for a :-

-Line of credit at the bank.$4,000

In 2020, the Company incurred legal fees of $2,000 to set up the corporation and $1,000 to issue shares to the president and CEO.

Iv. Other expenses deducted in the financial accounting computation of income include:

Depreciation and amortization.$45,000

Interest on the loan and operating line of credit .. 5,500

Interest on insufficient income tax instalments 400

Purchase of additional store fixtures at a going out of business sale..1,500

Damages under a breach of contract suit initiated by a supplier.1,500

v. Added to the capital asset account for leasehold improvements this year is $15,000/ This amount represents the stores share of new landscaping of the strip mall premises that was undertaken after road work was done in front of the mall.

You have correctly determined that X is entitled to a $50,000 capital cost allowance claim for 2021.

Required:-

(a)Compute the taxable business income for X for its 2021 fiscal year. Show all calculations whether or not they seem relevant (25 marks).

(b)Comment briefly on why any items were omitted from the calculation(5 marks)