AWO Gift Ltd. is a Canadian-controlled private corporation (CCPC), operating a small gift shop in Uxbridge, Ontario. The company has a December 31st year-end. The financial statements reported net income before taxes of $420,000 in 2020 for accounting purposes.

Financial information relating to 2020 is as follows:

A) Land adjacent to the gift shop was purchased with a $200,000 bank loan during the year to allow for an outdoor sales area during warm weather. The Interest expense on the loan for the year was $7,000, and the appraisal fee to finance the loan was $1,500. Both the interest and the appraisal fee were expensed by AWO Gift Ltd. in 2020.

B) The company hired a contractor to landscape the land. The $2,000 invoice for the landscaping was paid in full in 2020 and it was entered as a capital property on AWO Gift Ltd.'s Balance Sheet.

C) During the year, a new shelf (furniture) worth $4,000 was purchased for the shop and expensed on the books.

D) Amortization expense of $30,000 was deducted during the year. Total CCA for the year should be $28,000, and is not reflected in the financial statements. (Assume that the CCA amount given is the correct amount and it included all adjustments required. You are not required to calculate CCA amount separately for this question)

E) The following were also fully expensed during the year:

i) Meals with clients	$1,000
ii) Golf dues for employees	1,500
iii) A reasonable reserve for bad debt	2,000
iv) Interest paid to CRA for late income tax installments	700
v) Donation to registered charity	5,000

F) On December 30, 2020, the AWO Gift Ltd’s president announced a bonus to be paid to the company's key employee in the amount of $8,000, which was expensed in the books that day. The employee will receive the bonus in 2021 in two equal payments of $4,000, to be issued on January 30, 2021 and July 30, 2021.

Required:
Determine AWO Gift Ltd.'s net income for tax purposes for 2020.

Answer rating: 100% (QA)

Answer 419300 Net income total ... View the full answer