1. 1. Polytech Inc. calculated its Net Income for its Dec. 31st, 2019, year-end as follows:

Revenues $1,000,000

Other income 100,000 A

Expenses:

Cost of Goods Sold ($300,000) B

Selling and Administrative Costs (150,000) C

Amortization Expense (175,000) D

Other Expenses (125,000) (750,000) E

Income Before Tax Expense $350,000

Income Tax Expense: (75,000)

Net Income $275,000

Other Information:

1. 1. A. Other income consists of a capital gain.
2. 2. B. Cost of Goods Sold includes: $ 15,000 in lower of cost or market adjustment
3. 3. C. Selling and Administrative Costs include:

    - $ 30,000 in club memberships for senior management

    - $ 1,000 in interest on late tax installments

• 4. D. Polytech Inc. amortizes the following assets:
• -Building, 95% manufacturing use, 5% office use, with an ACB of $1.5 million and a UCC of $1.2 million on Jan. 1, 2019.
• -Warehouse leased in 2014 for a 10-year term with an option for two 5-year renewals. Leaseholds improvements were made in 2014 for $100,000 and 2016 for $40,000.
• -Manufacturing equipment (class 8) with a cost of $200,000 and a UCC on Jan. 1^st, 2019, of $140,000. In December the company sold equipment for $500,000 which was originally purchased for $400,000. Replacement equipment was also purchased in December for $650,000.
  5. E. Other Expenses include:

-$ 4,000 in 2019 year-end bonuses, paid on July 1^st, 2020

-$ 2,000 in bond amortization

-$ 4,000 in incorporation costs

1. A. Calculate minimum Net Income For Tax Purposes for the year ended Dec. 31, 2019;
2. B. End of year tax account balances; and,
3. C. Explain adjustments to GAAP income and any amounts that are unadjusted.

2. One of Polytech Inc.’s manufacturing facilities burned down in February of 2019. An insurance settlement of $1.5 million was reached in August 2019. In October 2019, Polytech commenced construction of a new building which was completed in March 2020 at a cost of $2 million. The manufacturing facility had an ACB of $1.2 million and UCC of $0.9 million prior to the fire. Polytech Inc. will utilize the Replacement Property Rules.

Calculate the CCA for the year ended Jan. 31, 2020, and tax balances.

Answer rating: 100% (QA)

1 A Net Income for Tax Purposes Revenues Other Income Expenses Revenues 1000000 Other Income 100000 ... View the full answer