Taxation - Green Manufacturing Company

Running head: TAX 1
Taxation
Name:
Institution:
Date:

TAX 2
GREEN MANUFACTURING COMPANY
Adjusted Statement of Income
For the Year Ending December 31st. 2019
Item $ $
Sales 16,000,000
Cost of goods sold (w.1) (8,380,000)
Gross profit 7,620,000
Less: Expenses
Salaries and wages (w.2) 640,000
Management bonuses (w.3) 240,000
Employee benefits (w.4) 130,000
Interest expense 54,000
Insurance expenses(w. 5) 29,000
Appraisal fees (w.6) 15,000
Legal and accounting fees 35,000
Repair and maintenance cost (w.7) 14,000
Travel 150,000
Advertising and promotion 100,000
Bad debt expense 80,000
Provision for sales returns(w.8) 96,000
Depreciation/armotization 135,000

TAX 3
Donations 18,000
General and administrative expenses 120,000
Loss on sold shares(w.9) 15,000
Total expenses (1871000)
NET INCOME BEFORE TAX AND OTHER INCOME 5,749,000
W1.
Cost of goods sold adjusted
Cost of sales $
Opening inventory at cost 1,240,000
Purchases 8,240,000
Ending Inventory (1,100,000)
Cost of sales 8,380,000
Reason: Cost of sales was adjusted because inventory value should be calculated using the
same method at the year end as well as the beginning inventory.
W2. Salaries and wages

TAX 4
Item $
Total salaries and wages 1,410,000
Less:
Presidents salary (560,000)
Spouse salaries (160,000)
Bookkepers salary (50,000)
Net salary 640,000
Reason: The president, his spouse and the bookekeepers are not daily workers of the
company. Their salaries should not be included as they do not have daily activities in this
company.
W.3 management bonuses
item $
Bonuses awarded and paid during the current year 120,000
Bonuses awarded at the end of the current year and paid June 30th.2020 120,000
240,000
Reason: Bonuses awarded at the end of the current year, to be paid (with interest) at the end
of the following year should not be included since we are only dealing with bonuses for the
year.
W.4 employee benefit
Item $

TAX 5
Canada Pension Plan and Employment
insurance
60,0000
Contributions to the company’s pension
plan for several employees (maximum
contribution of $6,000 for each
60,000
Annual club contributions 10000
total 130,000
Reason: Lump sum past service contributions to the company’s pension plan for one
particular employee should not be inclusive as this is capital by nature.
W.5 Insurance expense
item $
Public liability insurance for the current year 14,000
Three-year fire and theft insurance premium beginning the first day of the current
year
15,000
29,000
Reason: Life insurance on the president of the company required as collateral for a bank loan
should not be an expense for the company.
W6. Appraisal fees
item $
To determine the replacement cost of business assets to establish the current
year’s fire and theft insurance requirements
15,000

TAX 6
Reason: shares as collateral for a personal loan is not a business expense but a personal
expense.
W.7 repairs and maintenance
item $
Office cleaning, snow removal, lawn
care
2,000
Cost of landscaping 4,000
Repainting several offices 8,000
14,000
Reason: Engine replacement for four delivery trucks is capital in nature therefore omitting it
as a business expense.
W.8 provisions for sales return
item $
provision 102,000
provisioned (16,000)
Actual returned 10,000
96,000
Reason: Provision for sales returen will be affected by only $ 6000 that was actually
provisioned but not returned.
W.9 Income from Green Manufacturing Company-100% ownership