The 2018 and 2019 annual financial statements for TKL (prepared by Stan) are as follows:

	2018	2019
Revenue from manufacturing and sales	$2,000,000	$2,300,000
Dividend income from a taxable Canadian corporation	0	9,000
Investment interest income	2,000	6,000
Cost of goods sold	1,300,000	1,500,000
Gross profit	$702,000	$815,000
Salaries and wages	300,000	350,000
Other administrative costs	250,000	300,000
Net income before interest and amortization	$152,000	$165,000
Interest expense	10,000	10,000
Amortization	15,000	15,000
Net income after interest and amortization	$127,000	$140,000

Other information

1. Capital cost allowance calculations totaled $21,000 in 2018 and $24,000 in 2019.
2. In 2019, a bonus was announced for Stan’s key employee, equal to a total of 1% of the 2019 annual ‘revenue from manufacturing and sales.’ The bonus has been structured to be distributed in two equal payments during 2020 on January 31st and November 30th, and has been included in the 2019 ‘salaries and wages.’
3. Cost of goods sold and ‘other administrative costs’ adhere to the rules of the Income Tax Act.
4. Interest expense is compliant with Section 20(1)(c) of the Income Tax Act.
5. All of TKL’s ‘revenue from manufacturing and sales’ is from active business.
6. The dividends were received from a public corporation, of which TKL owns less than 1% of the shares.
7. TKL did not pay any dividends in 2019.

Note 1: All of the administrative expenses are compliant with the rules of the Income Tax Act.

Note 2: Workspace expenses represent ten percent of Stan’s housing costs. The total housing costs include utilities of $2,400, mortgage interest of $8,400, property taxes of $2,500, and home insurance of $1,200. (The business has met the conditions necessary to allow for the deduction of home-based business expenses)

1. Calculate the federal tax liability for TKL Industries Ltd. for 2019?

Answer rating: 100% (QA)

TKL Federal Tax Laibility 2019 Net Income After interest and Amortization 55223 x 26 140000 15... View the full answer