Problem 1

(12

marks)

:

ABC Co. is a proprietorship owned by

Anna

Winter

. Its taxation year ends on December 31. For

the current year,

Anna

's accountant,

Olaf

, has calculated a Net Income for ABC Inc. of

$193,200

using generally accepted accounting principles.

Other Information:

1. The following expenses were included i

n accounting expenses:

Amortization expense

$69,300

Financing fees to organize a business loan

2,000

Cost of sponsoring

local events (Through these local promotions,

the business made more customer relations)

7,200

Advertising on a US television station

(Directed at Canadian

market)

9,600

Business meals and entertainment

22,000

Loss from theft

16,200

Anna's art

lessons for her personal interest

800

Interest paid on late income tax instalments

1,400

2.

Olaf

has correctly calculated CCA for the year in the amount of $94,200.

3. The company spent $9,000 on Landscaping Costs during 2020. In accordance with

GAAP,

these costs were capitalized and amortized in the accounting records.

Required:

Prepare a reconciliation to calculate

ABC Co.'s net business income for tax purposes

per the method we used in class (i.e

.

4 steps starting with Accounting Net Income).

Show your

full responses

in the order of the above items

and clearly indicate relevant items under the

Addition

s

and Deduction