Ken Gray Runs a Small Proprietorship (Ken's Fish)that Specializes in Fishing

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(*All inventory is valued at market value.)
Required:
A)Calculate the net income for tax purposes for Ken's Fish.
B)Explain why any items have been omitted.
C)Briefly discuss how your answer in A)would change if Ken had valued his inventory at cost.
A)

B)Omitted items:
• Advertising in an American newspaper is not deductible when the targeted market is Canadian.S.19
• Half of the meals and entertainment are not deductible.S 67.1
• Property taxes on vacant land is only deductible to the extent that income is earned.S.18(2),(3)The amount can be added to the cost base of the land.
• Recreational fees are not permitted as deductions.S.18(1)(l)
• The convention is not within the territorial scope of the organization hosting the conference,therefore,it is not an allowable deduction.S.20(10)
C)The Income Tax Act requires that inventories be valued at either:
1)the lower of cost or market value of each item,or
2)market value of all items of inventory.
Therefore,Ken would need to revalue his inventory in order to determine the lower of cost or market,which could affect the balance of the company's cost of goods sold and net income.

Ken Gray Runs a Small Proprietorship (Ken's Fish)that Specializes in Fishing

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Ken Gray Runs a Small Proprietorship (Ken's Fish)that Specializes in Fishing

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