Fijian Distributors (FD) is a business carried on by Ranu Bola as a sole proprietorship. For the

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Question:

Fijian Distributors (FD) is a business carried on by Ranu Bola as a sole proprietorship. For the taxation year ended December 31, 2021, Ranu has determined that her net income for accounting purposes is $178,000 which is calculated using ASPE.

Other Information:

1. In determining accounting net income, Ranu has $46,200 in amortization expenses and would be eligible to claim a maximum CCA of $57,800.

2. Accounting expenses included a reserve for doubtful debts of $6,325 and a reserve for inventory obsolescence of $8,765. The method for determining doubtful debts for accounting purposes is the same as that used for income tax purposes.

3. During the year, FD spent $5,555 for landscaping the grounds around its Dryden office. The amount was capitalized for accounting purposes. Since the expenditure was made late in the year no amortization was for the current year.

4. Accounting expenses $13,600 in business meals, as well as $2,100 in charitable donations.

5. The business spent $3,450 for advertisements on a U.S. radio station. As the station is on the border with Ontario, the audience for this station is significantly Canadian residents.

6. Ranu spent $6,400 for advertising circulars, charging the full amount to expenses. On December 31, 2021, one-half of these circulars were still on hand.

7. One of John's employees stole cash in the amount of $1,300. As the individual has left town, this amount is unlikely to be recovered.

8. The following additional items were included in the accounting expenses:

Cost of Sponsoring local hockey team $2,250

Interest on building mortgage 6,420

Appraisal costs on land to be sold are 2,200

Damages resulting from breach of contract 1.460.

Had the contract been fulfilled the amounts would have been business income.

9. Also included in the accounting expenses were $2,250 in fees paid to Ranu's 17-year-old daughter for creating and maintaining the website of FD. In pricing this work, Ranu found that it would cost at least $3,600 to obtain the equivalent services from an external consultant.

Required (show all calculations):

a. Calculate the minimum business income Ranu Bola would include in her 2021 personal income tax return.

b. Identify four items from the above and indicate why you have not included these items in your calculations. For part use the following format for your answer. Accounting Income Additions: (list the items and amounts) Deductions: (list the items and amounts) 2021 Business Income.