The controller of Choleva Products Limited has provided you with the following draft income statement as well as some notes that she made during the preparation of this statement.
Choleva Products Limited
STATEMENT OF INCOME For the
year ended December 31, 2012
Sales $ 8,300,000
Cost of goods sold (Note (1)) (6,800,000)
Gross profit $ 1,500,000
Commission income 70,000
$ 1,570,000

Gain on disposal of property, plant and equipment (Note (3)) 40,000
Net income before income taxes $ 840,000
Provision for income taxes (400,000)
Net income after income taxes $ 440,000
Notes Prepared by Controller:
(1) The cost of goods sold expense includes the following amounts:
(a) A $9,000 loss from a theft by a warehouse employee;
(b) A $15,000 reserve for future decline in the value of inventory because of new products expected to be introduced by the competitor. There was no such reserve in 2011.
(2) Administration and marketing expenses include:
(a) An $11,000 increase in the reserve for warranty expenses;
(b) $4,000 of donations to registered charities;
(c) $1,500 for golf club membership dues for the Vice-President of Sales and $2,000 for meals and entertainment expenses at the golf club. The Vice-President of Sales uses the club to generate sales;
(d) $85,000 in accrued bonuses, including $62,000 paid to employees on May 31, 2013, and $23,000 paid to employees on June 30, 2013;
(e) A $15,000 year-end party for all employees;
(f) $8,000 of financing fees incurred in connection with the mortgage of the corporation's new plant, including legal fees of $6,000 and an appraisal fee of $2,000;
(g) $5,000 of legal fees in connection with the purchase of shares of another company; and
(h) $300 for an upgrade of word processing software.
(3) The fixed asset section of the controller's working papers indicate the following:
(a) The undepreciated capital cost balances at December 31, 2011 were as follows:
Class 3 $200,000
Class 8 60,000
Class 10 80,000
Class 13 37,500
CEC 5,000
(b) Gain on disposal of property of plant and equipment consists of the profit on the sale of the corporation's only Class 3 asset (proceeds: $180,000; original cost in 1996: $300,000). The land on which the building was situated was also sold for its fair market value which was equal to its cost in 1996.
(c) During 2012, the corporation made the following purchases:
€¢ A new office building was purchased in October for $700,000. The cost of the related land was $400,000. It cost $20,000 to pave part of the land for use as a parking lot and $30,000 to erect fencing;
€¢ New office furniture was purchased for $25,000. This purchase replaced office furniture which was sold for its $4,000 net book value (original cost: $10,000);
€¢ An unlimited life franchise was purchased for $100,000;
€¢ A 10-year licence to use patented information (expiring June 30, 2022) was purchased on July 1 for $20,000; and
€¢ Improvements on its leased head office premises which were rented in 2010 for four years with two successive options to renew for five years and five years. Improvements had originally been made in 2010 in the amount of $45,000. Additional improvements were made in 2012 at a cost of $28,000.
(d) During the year, the corporation sold some small tools (each costing less than $500) for their net book value of $500.
(4) Interest on long-term debt includes:
(a) Bond discount amortization in the amount of $2,000;
(b) $18,000 of interest on bonds issued to buy shares in another company; and
(c) $50,000 of interest on the mortgage on the new plant.
REQUIRED
Calculate the corporation's minimum income from business or property for the year ended December 31, 2012, under the provisions of the Act. Assume all expenses are reasonable in the circumstances. Support your treatment of each item listed above with a reason or a section reference. Ignore the effects of leap years.

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Administrative and rnarketing expenses (Note (2)) ····· Amortization (Note (3)) Interest on long-term debt (Note (4)) . . . . . . .. . . . . . . $500,000 80,000 70,000 120,000 770,000 $ 800,000