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prob12-14 (fall 2011 final review)

prob12-14 (fall 2011 final review) - Problem 12-14(Text Ch...

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Problem 1 2-14 (Text: Ch. 11, 12) The CA in your office who has completed the file for your client, Make-it and Save-it Inc., has left for a well-deserved two-week vacation. Before leaving, she asked you to prepare Schedule 1 of the T2 Corporate Tax Return and calculate Federal Part I tax and Part IV tax for the year ended December 31, 2011. The CA has provided you with financial statements, which have been prepared for tax purposes, and notes on selected items in the financial statements (Appendix I). Required : Calculate net income, taxable income and Federal Part I tax, and Part IV tax for Make-it and Save-it Inc. for the year ended December 31, 2011. APPENDIX I Make-it and Save-it Inc. Balance Sheet December 31, 2011 Assets Current Cash $ 210,000 Accounts receivable 935,000 Prepaid expenses 35,000 Inventory 1,025,000 2,205,000 Capital assets, net of amortization 1,322,000 Investments 790,000 $4,317,000 Liabilities Current Accounts payable $ 360,000 Income taxes payable 280,000 640,000 Long-term debt 1,000,000 Due to shareholder 1,353,000 2,993,000 Shareholder's Equity Share capital 150,000 Retained earnings 1,174,000 1,324,000 $4,317,000 Page 1 of 5
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Problem 1 2-14 (Cont.) APPENDIX I (Continued) Make-it and Save-it Inc. Statement of Income and Retained Earnings For the Year Ended December 31, 2011 Sales $6,665,000 Cost of goods sold, Schedule A 5,878,000 Gross profit 787,000 Expenses Advertising 152,000 Amortization of capital assets 12,000 Automotive expenses 58,000 Bad debts 138,000 Charitable donations 2,000 Interest on long-term debt 80,000 Management salaries 200,000 Moving expense 25,000 Office expense 118,000 Professional fees 36,000 Promotion 63,000 Salaries and benefits Administrative
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