While for many years, Sweat Ltd. used a December 31 year end, a 2021 change in the nature of its business resulted in the Company requesting a change in their taxation year end to August 31 to coincide with an anticipated annual slow point in the business. Based on the information provided, the CRA accepted this change.

The change will be implemented in 2021. The income statement for the period January 1, 2021 to August 31, 2021, prepared by the accountants is as follows:

Sweat Ltd.

Income Statement

8 Month Period Ending August 31, 2021

Sales (All Within Canada) $916,000

Cost of goods sold ( 485,000)

Gross Margin $431,000

Other Expenses (Excluding Income Taxes):

Wages and Salaries ($153,400)

Amortization ( 49,300)

Rent ( 56,700)

Interest Expense ( 5,500)

Foreign Exchange Loss ( 4,200)

Travel and Promotion ( 44,300)

Bad Debt Expense ( 5,400)

Warranty Expense ( 5,800)

Charitable Donations ( 3,100)

Other Business Expenses ( 19,800) ( 347,500)

Business Income $ 83,500

Gain on sale of investments 3,900

2021 Accounting Income before income taxes $ 87,400

Other Information relevant to the new 2021 taxation year:

1. In determining the cost of goods sold, the Company deducted a $17,800 reserve for inventory obsolescence.

2. Wages and salaries includes a $35,000 bonus to Sweat Ltd.'s CEO. Because she anticipates retiring in December of 2021, the bonus will not be paid until January of 2023.

3. Amortization is on the furniture and fixtures and delivery vehicles. The capital cost of the furniture and fixtures is $147,000 and, at January 1, 2021, the Class 8 UCC balance is $79,800. New furniture was purchased at a cost of $20,500 in the new 2021 taxation year and old furniture with a capital cost of $14,200 was sold for $9,500 in the same period.

On January 1, 2021, the Class 10 UCC balance was $103,400. There were no additions or disposals in this Class during the 8 month period ending August 31, 2021.

4. The interest expense relates to a line of credit that was used to finance seasonal fluctuations in inventory.

5. The foreign exchange loss resulted from financing costs related to the purchase of merchandise in the United Kingdom.

6. The travel and promotion expense consisted of the following items:

Business Meals and Entertainment $15,200

Hotels and Airfare 21,400

Golf Club Memberships 7,700

Total Travel and Promotion Expense $44,300

7. For accounting purposes, the Company establishes a warranty reserve based on estimated costs. On The reserve established December 31, 2020 was $5,400 and a new reserve of $6,200 was established August 31, 2021.

8. The accounting gain on the sale of investments is equal to the capital gain for income tax purposes.

9. During the period January 1, 2021 to August 31, 2021, the Company declared and paid dividends of $27,600.

10. The Company has a 2019 non-capital loss balance of $18,700 and a 2019 net capital loss balance of $6,250.

Required: Reconcile the accounting income to net income and determine the taxable income for Sweat Ltd. for the 8 month period ending August 31, 2021. Indicate the amount and type of any carryovers that are available to be applied to other taxation years.