Central Products Ltd., which sells goods Canada-wide, is in the processof completing its 2018 financial statements and
Question:
Central Products Ltd., which sells goods Canada-wide, is in the processof completing its 2018 financial statements and tax return. A junior accountant has given you a list of items that he does not know how to treat for tax purposes:
1.
Purchase price of a patent giving the company exclusive rights to manufacture a product
$120,000
2.
Cost of annual dues to a golf club for three senior salespeople to entertain existing and potential customers
8,000
3.
The union contract expired four months before the year end and bargaining is still in process. A 3% wage increase is expected, and the company has recorded a reserve to cover the four-month period
60,000
4.
Legal fees paid for making a representation to a provincial government against a proposal to introduce a payroll tax
15,000
5.
Donations paid to a registered charity
10,000
6.
Advertising in a foreign trade newspaper that was distributed to Canadian customers
4,000
7.
Travel costs (airfare and lodging) for a senior executive to visit a Foreign supplier to inspect and sign a purchase agreement for a new manufacturing machine. The machine was delivered and used in 2018
3,000
8.
Legal, accounting, and printing costs to prepare a prospectus offering common shares for sale to the public
32,000
9.
Cost for attending three conventions during the year. Convention #1 ($750) in Vancouver was in July 2018. Conventions #2 in Calgary ($1,350) and #3 in Toronto ($1,050) were both in December 2018. Each convention includes a cost of $100 for meals.
3,150
10.
Interest for late payment of municipal property tax for the warehouse
500
11.
Christmas gifts to staff (under $100 each)
$1,200
12.
Hockey tickets to entertain customers
$2,000
Required:
For each of above items advise whether or not it is deductible in calculating Income from Business and how much and provide the Income Tax Act reference in support.
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward