Taxation problem

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.