Samson Enterprises Ltd. achieved a profit in 20X1 of $120,000.The

Samson Enterprises Ltd. achieved a profit in 20X1 of $120,000.The income statement is summarized below.
Sales ……………………………….. $1,300,000
Cost of sales……………………………….. 780,000
Gross profit ……………………………….. 520,000
Administrative and selling expenses …… 451,000
………………………………..………… 69,000
Other income (expenses) ………………. 51,000
Net income before tax …………………… $ 120,000
Certain details of the summarized income statement are provided below.
1. Administrative and selling expenses include the following:
(a) Donations to registered charities $ 3,000
(b) Amortization/depreciation of tangible assets 12,000
1: At the end of the previous year, the undepreciated capital cost of certain asset classes was as follows:
Class 1………….. $80,000
Class 8………….. 32,000
Class 10………….. 50,000
2: During the current year, the company sold its land and building for $150,000 (land $40,000, building $110,000) and moved into leased premises. The original cost of the property was $130,000 (land $30,000, building $100,000).The building had an accounting book value of $70,000 at the time of sale.
(c) Legal fees:
• Settling a dispute relating to the purchase of defective merchandise for sale 4,000
• Reorganizing the corporation’s share capital 8,000
(d) Amortization 9,000
3: The company owns several pieces of equipment. During the year, one unit that originally cost $10,000 and had a book value of $6,000 was sold for $8,000.
The current year’s amortization expense applies to a number of intangible assets.
• During the previous year (20X0), the company took over a competitor and purchased goodwill for $40,000 and a franchise (unlimited life) for $10,000.
• During the current year, the franchise was sold for $8,000 when its book value for accounting purposes was $9,000. In addition, the company purchased an existing patent from a competitor for $20,000.The patent with a remaining legal life of 10 years was purchased on the first day of the current year.
2 Other income (expenses) includes the following:
Gain on sale of land…………………………….. $10,000
Gain on sale of building…………………………….. 40,000
Gain on sale of equipment ………………………… 2,000
Loss on sale of franchise …………………………….. (1,000)
……………………………..……………………… $51,000
Required:
Determine the net income for tax purposes of Samson Enterprises for the 20X1 taxation year.
Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented...