Cam: \"Before we leave, I also have a question for you. As you know, even though I own some shares of Kitchen, | work full time as a chef so am not an employee of the Company. I've accumulated a signicant balance in my investment portfolio and was wondering if it would be advantageous for me to create a new corporation to hold some of these investments. The investments earn about $215,000 of interest income per year. Do you think this is a good idea? Would creating my own corporation have any implications for Kitchen?\" You: \"Sure I can prepare an analysis for you to consider, thanks for coming by the office!" Please see Exhibits 3 and 4 for additional information about the Company, Corrine and Cam. Required: Please prepare a short memo to address Corrine and Cam's questions. \fExhibit 2 Financial Statements The following statements have been prepared using ASPE for Dec 31, 2022: Kitchen Supply Co Income Statement - Draft For the year ended December 31, 2022 Sales revenue Cost of goods sold Gross prot Operating expenses: Selling and administration expenses (Note 1) Amortization expense Other operating expenses (Note 2) Operating income Other income and expenses: Interest expense Gain on sale of investments Dividend income (Note 3) Net income before tax Income tax expense Net income $ 2,760,000 1,125,500 1,634,500 215,000 300,000 111,000 626,000 1,008,500 90,000 50,000 24,000 16,000 992,500 198,500 794,000 Kitchen Supply Co Balance Sheet - Draft As at December 31, 2022 Current Assets Cash Accounts receivable Inventory Non Current Assets Property, plant, and equipment (Note 4) Land Total Assets Current Liabilities Accounts payable Bank loan - current portion Non Current Liabilities Loan to Corrine (Note 5) Bank loan - non current portion Total liabilities Shareholders Equity Common shares Retained earnings (Note 6) Total Liabilities and Shareholders Equity 332,000 389,000 96,000 817,000 2,580,900 160,000 2,740,900 3,557,900 15,600 200,000 215,600 23,500 2,700,000 2,723,500 2,939,100 100 618,700 3,557,900 Exhibit 4 Additional Information from Corrine and Cam Relevant information is as follows: 1. Assume both spouses have a personal tax rate of 51%. 2. In their province of residence, the dividend tax credit is 4/13 of the gross up on non-eligible dividends and 5/11 of the gross up on eligible dividends. 3. Kitchen is currently the only private company either of the spouses owns shares of. Exhibit 3 Extracts from Kitchen's Tax Files Tax & Co also filed Kitchen's 2021 tax return and you have the following information from last year 1. The Company had depreciable assets with the following undepreciated capital cost (UCC) balances at the beginning of its 2022 taxation year: Class 1 1,550,000 Class 10 75,000 The building is used almost exclusively for manufacturing and processing. Tax & Co filed the appropriate election when the building was put in use in 2017 to place the building in a separate CCA class (meaning the CCA rate will be 10%). At the end of 2021, the Company had a GRIP balance of $80,000. The Company's December 31, 2021, Eligible and Non-Eligible RDTOH balances were $5,600 and $23,000. For 2021 , Kitchen had ADJUSTED Aggregate Investment Income of $54,680. Its Taxable Capital Employed In Canada was $1,172,000 for 2021 and is $1 ,150,000 for 2022. The provincial tax rate is 2% on income eligible for the small business deduction and 10% on other income