The controller of Tek Enterprises Ltd. provided the Accountant with the following information. Tek Enterprises Ltd. Income
Question:
Tek Enterprises Ltd.
Income
For the fiscal year ended December 31, 2012
Notes:
(1) Tek Enterprises Limited is a CCPC. It is not associated with any corporations. It paid federal Part I tax of $35,000 in 2012.
(2) The following items were deducted in the computation of Canadian wholesaling income above:
SR&ED expenditures (current in nature) ................................................. $50,000
Federal political contributions ................................................................. 1,000
(3) The taxable capital gain was calculated as follows:
(4) The corporation has net capital losses (incurred in 1999) of $13,000. It has unused foreign business tax credits (from 2011) of $100.
(5) Taxable capital employed in Canada in 2011 was $10.3 million.
The Accountant assigned a junior staff member to calculate the federal Part I tax payable for Tek Enterprises Ltd. The following is his calculation.
Net income .......................................................................... $392,000
Dividends ............................................................................ (21,000)
Donations ............................................................................ (75,000)
Net capital losses .................................................................... (13,000)
Taxable income ..................................................................... $283,000
Write a memo in point-form explaining to the junior staff member the errors in his calculation. Do not redo the calculations. Only describe his incorrect procedures in arriving at Part I tax so that the calculation may be redone correctly.
Step by Step Answer:
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett