You have been provided the following information from your client; a corporation called XYZ Limited. Income Statement (for Accounting) and related notes are provided below. Required: Calculate the total business income for tax purposes for XYZ Limited for 2020. Your response will be completed in the TABLE found at the END (BOTTOM) of the question details. XYZ Limited Income Statement For the year ended December 31, 2020 Sales Cost of Goods Sold (Note a) Gross Profit General and administrative expenses (Notes b-g) Selling expenses (Note h) Income from operations Other income (Notes i-i) Provision for income taxes (accounting) Net income $98,700,000 $32,500,000 $66,200,000 $11,200,000 $15,644,000 $39.356,000 $25,000 $10.320,000 $29,011,000 The following detailed information has also been provided: a) XYZ Ltd. has recorded an inventory obsolescence provision. All items that did not sell within the last 180 days were written down to the carrying value. The provision was $325,000. b) Towards the end of 2020 XYZ Ltd. initiated an early retirement package for employees over the age of 60. The deadline to accept the offer packages is January 30, 2021 No replies have been received as of December 31, 2020; it is expected that most employees will sign the early retirement package. The cost to the company is expected to be $450,000. It has been accrued in the financial statements. c) The professional and legal fees account included the following items: Cost incurred to renegotiate the company bank $15,000 i loans Cost incurred to defend the company against a $75,000 wrongful dismissal ii Legal and accounting fees to issue shares $12,000 d) The following is a breakdown of the amounts paid by XYZ Ltd. towards insurance for its employees (already recorded in the F/S). $1,000,000 insurance policy on the life of the president included in insurance expense ($200 per $2,400 i month). See note below on purpose of policy. Group term life insurance for employees included $2,500 in salaries and benefits ($6,250 x 12 months) XYZ Ltd. is the beneficiary of the policy on the president. That policy is used as collateral on the bank loan. This is because the president plays a significant role in the success of the XYZ Ltd. business. The premiums on the policy are equal to the net cost of the insurance for the policy. e) XYZ Ltd. made significant repairs to the outside of the building for a total cost of $50,000. Of that amount, $10,000 relates to landscaping costs. f) Also included in general and administrative expenses were the following costs: Interest on late payment of municipal taxes $2,500 Loss from theft by the payroll clerk $10,000 Donations to various registered charities $10,000 Political contributions $10,000 Amortization $134,000 g) The salaries and benefits account shows contributions for certain employees to the company's registered pension plan. The contributions were made March 31, 2021. The pension plan is a defined contribution (money purchase) plan. The company matches the employees' contributions on a dollar for dollar basis. Registered Pension Plan Employment compensation i President $14,6751 $260,000 ii Controller $12,700 $160,000 g) The salaries and benefits account shows contributions for certain enployees to the company's registered pension plan. The contributions were made March 31, 2021. The pension plan is a defined contribution (money purchase) plan. The company matches the employees' contributions on a dollar for dollar basis. Registered Pension Plan Employment compensation i President $14,675 $260,000 ii Controller $12,700 $160,000 h) The selling expenses account included the following items: i Sponsorship costs local events $1,000 ii Meals/entertainment costs of salespeople $210,000 iii Membership for salespeople at local golf courses $15,000 Staff holiday party and summer barbecue (2/ $2,500 iv Basketball tickets given to clients $9.500 i) During the year XYZ Ltd. sold some of its capital assets for a loss of $75,000. i) During the year XYZ Ltd. earned a total of $25,000 in interest income from an investment in a money market fund. Other relevant information: k) Capital cost allowance (for tax purposes) for the year was $74,000. 1) A total of $144,000 in management bonuses have been accrued for in the financial statements. They were paid on June 15, 2021. year) Instructions: 1) The starting point is net income for accounting purposes (NI for A) 2) For each item listed, identify whether it should be: Added back to NI (an expense for accounting but not permitted for tax) Added to NI (income not recorded for accounting, but should be for tax) Deducted from NI (income for accounting but not permitted for tax) Deducted from NI (an expense not recorded for accounting, but should be for tax) No impact (how it is recorded for accounting is correct for tax) For Column A: CLICK on the individual cell to activate the dropdown arrow. Make your selection given the options in the dropdown list. For Column B: ENTER the correct amount to add back or deduct. If only a portion of the amount should be added back or deducted, enter that portion. For Column C: EXPLAIN the reason for your adjustment, including the ITA section All columns, A, B, and C must be correct for each row to score For Column B: ENTER the correct amount to add back or deduct. If only a portion of the amount should be added back or deducted, enter that portion. For Column C: EXPLAIN the reason for your adjustment, including the ITA section All columns, A, B, and C must be correct for each row to score Column A Column B Column C CLICK (select your response using the dropdown box (activated when click on the box) EXPLAIN (type) in the reason for your adjustment, including the relevant ITA section. If you need more space use 'wrap text', or use Notes 1, 2, etc. ENTER the adjustment amount $29,011,000 S 10,320,000 No impact (correct for tax) Net income for accounting purposes (START) Income tax (accounting) Inventory provision Retirement accrual Negotiate loan fees Cost to defend lawsuit Legal/accounting fees to issue shares Life insurance (president) Group term life insurance Repairs to outside of building Landscaping costs Late payment for municipal taxes Payroll theft loss Charity donations Political contributions Accounting amortization RPP contributions - President RPP contributions - Controller Sponsorship (local event) Meals/entertainment - sales Golf course membership Staff party (2) Basketball tickets - clients Capital asset loss Money market interest CCA Management bonus Net income for tax purposes (FINISH) Other a b c (1) ci) c (iii) d (i) d (ii) e f (i) f(ii) f(iii) f(iv) f(v) g (0) h (i) h (*) h () h (iv) h (v) i j k 1 Calculate the final net income for tax purposes You have been provided the following information from your client; a corporation called XYZ Limited. Income Statement (for Accounting) and related notes are provided below. Required: Calculate the total business income for tax purposes for XYZ Limited for 2020. Your response will be completed in the TABLE found at the END (BOTTOM) of the question details. XYZ Limited Income Statement For the year ended December 31, 2020 Sales Cost of Goods Sold (Note a) Gross Profit General and administrative expenses (Notes b-g) Selling expenses (Note h) Income from operations Other income (Notes i-i) Provision for income taxes (accounting) Net income $98,700,000 $32,500,000 $66,200,000 $11,200,000 $15,644,000 $39.356,000 $25,000 $10.320,000 $29,011,000 The following detailed information has also been provided: a) XYZ Ltd. has recorded an inventory obsolescence provision. All items that did not sell within the last 180 days were written down to the carrying value. The provision was $325,000. b) Towards the end of 2020 XYZ Ltd. initiated an early retirement package for employees over the age of 60. The deadline to accept the offer packages is January 30, 2021 No replies have been received as of December 31, 2020; it is expected that most employees will sign the early retirement package. The cost to the company is expected to be $450,000. It has been accrued in the financial statements. c) The professional and legal fees account included the following items: Cost incurred to renegotiate the company bank $15,000 i loans Cost incurred to defend the company against a $75,000 wrongful dismissal ii Legal and accounting fees to issue shares $12,000 d) The following is a breakdown of the amounts paid by XYZ Ltd. towards insurance for its employees (already recorded in the F/S). $1,000,000 insurance policy on the life of the president included in insurance expense ($200 per $2,400 i month). See note below on purpose of policy. Group term life insurance for employees included $2,500 in salaries and benefits ($6,250 x 12 months) XYZ Ltd. is the beneficiary of the policy on the president. That policy is used as collateral on the bank loan. This is because the president plays a significant role in the success of the XYZ Ltd. business. The premiums on the policy are equal to the net cost of the insurance for the policy. e) XYZ Ltd. made significant repairs to the outside of the building for a total cost of $50,000. Of that amount, $10,000 relates to landscaping costs. f) Also included in general and administrative expenses were the following costs: Interest on late payment of municipal taxes $2,500 Loss from theft by the payroll clerk $10,000 Donations to various registered charities $10,000 Political contributions $10,000 Amortization $134,000 g) The salaries and benefits account shows contributions for certain employees to the company's registered pension plan. The contributions were made March 31, 2021. The pension plan is a defined contribution (money purchase) plan. The company matches the employees' contributions on a dollar for dollar basis. Registered Pension Plan Employment compensation i President $14,6751 $260,000 ii Controller $12,700 $160,000 g) The salaries and benefits account shows contributions for certain enployees to the company's registered pension plan. The contributions were made March 31, 2021. The pension plan is a defined contribution (money purchase) plan. The company matches the employees' contributions on a dollar for dollar basis. Registered Pension Plan Employment compensation i President $14,675 $260,000 ii Controller $12,700 $160,000 h) The selling expenses account included the following items: i Sponsorship costs local events $1,000 ii Meals/entertainment costs of salespeople $210,000 iii Membership for salespeople at local golf courses $15,000 Staff holiday party and summer barbecue (2/ $2,500 iv Basketball tickets given to clients $9.500 i) During the year XYZ Ltd. sold some of its capital assets for a loss of $75,000. i) During the year XYZ Ltd. earned a total of $25,000 in interest income from an investment in a money market fund. Other relevant information: k) Capital cost allowance (for tax purposes) for the year was $74,000. 1) A total of $144,000 in management bonuses have been accrued for in the financial statements. They were paid on June 15, 2021. year) Instructions: 1) The starting point is net income for accounting purposes (NI for A) 2) For each item listed, identify whether it should be: Added back to NI (an expense for accounting but not permitted for tax) Added to NI (income not recorded for accounting, but should be for tax) Deducted from NI (income for accounting but not permitted for tax) Deducted from NI (an expense not recorded for accounting, but should be for tax) No impact (how it is recorded for accounting is correct for tax) For Column A: CLICK on the individual cell to activate the dropdown arrow. Make your selection given the options in the dropdown list. For Column B: ENTER the correct amount to add back or deduct. If only a portion of the amount should be added back or deducted, enter that portion. For Column C: EXPLAIN the reason for your adjustment, including the ITA section All columns, A, B, and C must be correct for each row to score For Column B: ENTER the correct amount to add back or deduct. If only a portion of the amount should be added back or deducted, enter that portion. For Column C: EXPLAIN the reason for your adjustment, including the ITA section All columns, A, B, and C must be correct for each row to score Column A Column B Column C CLICK (select your response using the dropdown box (activated when click on the box) EXPLAIN (type) in the reason for your adjustment, including the relevant ITA section. If you need more space use 'wrap text', or use Notes 1, 2, etc. ENTER the adjustment amount $29,011,000 S 10,320,000 No impact (correct for tax) Net income for accounting purposes (START) Income tax (accounting) Inventory provision Retirement accrual Negotiate loan fees Cost to defend lawsuit Legal/accounting fees to issue shares Life insurance (president) Group term life insurance Repairs to outside of building Landscaping costs Late payment for municipal taxes Payroll theft loss Charity donations Political contributions Accounting amortization RPP contributions - President RPP contributions - Controller Sponsorship (local event) Meals/entertainment - sales Golf course membership Staff party (2) Basketball tickets - clients Capital asset loss Money market interest CCA Management bonus Net income for tax purposes (FINISH) Other a b c (1) ci) c (iii) d (i) d (ii) e f (i) f(ii) f(iii) f(iv) f(v) g (0) h (i) h (*) h () h (iv) h (v) i j k 1 Calculate the final net income for tax purposes