1. Polytech Inc. calculated its Net Income for its Dec. 31st, 2019, year-end as follows:
Revenues $1,000,000
Other income 100,000 A
Expenses:
Cost of Goods Sold ($300,000) B
Selling and Administrative Costs (150,000) C
Amortization Expense (175,000) D
Other Expenses (125,000) (750,000) E
Income Before Tax Expense $350,000
Income Tax Expense: (75,000)
Net Income $275,000
Other Information:
A. Other income consists of a capital gain.
B. Cost of Goods Sold includes:
$ 15,000 in lower of cost or market adjustment
C. Selling and Administrative Costs includes:
$ 30,000 in club memberships for senior management
$ 1,000 in interest on late tax installments
D. Polytech Inc. amortizes the following assets:
· Building, 95% manufacturing use, 5% office use, with an ACB of $1.5 million and a UCC of $1.2 million on Jan. 1, 2019.
· Warehouse leased in 2014 for a 10-year term with an option for two 5-year renewals. Leaseholds improvements were made in 2014 for $100,000 and 2016 for $40,000.
· Manufacturing equipment (class 8) with a cost of $200,000 and a UCC on Jan. 1st, 2019, of $140,000. In December the company sold equipment for $500,000 which was originally purchased for $400,000. Replacement equipment was also purchased in December for $650,000.
E. Other Expenses include:
$ 4,000 in 2019 year-end bonuses, paid on July 1st, 2020
$ 2,000 in bond amortization
$ 4,000 in incorporation costs
(1) Calculate minimum Net Income For Tax Purposes for the year ended Dec. 31, 2019;
(2) End of year tax account balances.
(3) Explain adjustments to GAAP income and any amounts that are unadjusted.
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