Goodman Inc. is a Canadian public corporation that sells baby products in Ontario. A condensed income statement for Maxwell Inc. for its fiscal year of 2021 shows the following:

Goodman Inc.

Fiscal 2021 Condensed Income Statement

Sales $5,500,000

Cost of Sales (3,500,000)

Gross Profit 2,000,000

Selling, General and Administration Expenses (614,000)

Accounting gain on Sale of Fixed Assets 100,000

Income Before Income Taxes 1,486,000

Income Tax Expense (424,000)

Net Income 1,062,000

The information in the following notes relates to the above income statement amounts:

1. Depreciation and amortization expense included in the selling, general and administration (SG&A) expenses was $250,000.

2. Some of the accounting gain on sale of fixed assets (listed in the income statement) resulted from disposition of Class 8 assets with an original cost of $270,000 and proceeds of $210,000. Class 8 also had $320,000 of eligible property additions during the year. The UCC of Class 8 at the beginning of 2021 was $200,000, and CCA has not yet been determined; CCA from all other classes is calculated correctly as $150,000.

3. The rest of the accounting gain on sale of fixed assets (listed in the income statement) resulted from disposition of a vacant land, which has an adjusted cost base of $80,000 at the beginning of 2021 and proceeds of $120,000 from the disposition.

4. Financing cost of $50,000 was incurred to renegotiate loan terms and was included in the SG&A expenses above. Political contributions of $3,000 and charitable donations of $7,000 were also included in SG&A.

5. Meals and entertainment expense of $6,000 was included in SG&A, of which $3,000 was spent on a company-wide picnic, the only event that was attended by all the employees in 2021.

Required: 

Calculate Goodman Inc.’s minimum Division B income. Show all relevant calculations and explain any amounts, if necessary. No need to list ITA references. Write your answers under the title of Section III on your Answer Booklet, you can use as much space as needed.

Answer rating: 100% (QA)

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