SEA LtdIs a Canadian-Controlled Private Corporation, Operating a Small Gift Store

question 4

Essay

SEA Ltd.is a Canadian-controlled private corporation, operating a small gift store in Kelowna.The company has a December 31st year-end.SEA's financial statements reported net income before taxes of $210,000 in 2020.
Financial information relating to 2020 is as follows:
Land adjacent to the gift shop was purchased with a $75,000 bank loan during the year to allow for an outdoor sales area during warm weather.Interest expense on the loan for the year was $9,600, and the appraisal fee to finance the loan was $1,000.Both the interest and the appraisal fee were expensed by SEA in 2020.
The company hired a contractor to landscape the land.The $5,000 bill for the landscaping was paid in full during the year and capitalized on SEA's Balance Sheet.
During the year, a new display case worth $2,000 was purchased and expensed on the books.
Amortization expense of $21,000 was deducted during the year.Total CCA (following any adjustments) for the year was $16,000 and is not reflected in the financial statements.
The following were also expensed during the year:
$\begin{array}{|l|l|}\hline \text { Meals with clients } & \$ 1,400.00 \\\hline \text { Lawn mowing service } & \$ 1,000.00 \\\hline \text { Golf dues for employees } & \$ 5,000.00 \\\hline \text { A reasonable reserve for bad debt } & \$ 2,000.00 \\\hline\end{array}$
On December 30th, SEA's president announced a bonus to be paid to the company's key employee in the amount of $5,000, which was expensed on the books that day.The employee will receive the bonus in 2021 in equal payments of $2,500, to be issued on January 30th and July 30th.
Required:
Determine SEA Ltd.'s net income for tax purposes for 2020.

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Definitions:

Empirical Rule

A statistical principle that asserts in a normal distribution, almost all data points are contained within three standard deviations from the average.

Tchebysheff's Theorem

Tchebysheff's theorem provides a bound on the probability that a random variable deviates from its mean, regardless of the distribution's shape, for any number of standard deviations.

Stem-And-Leaf Plot

A graphical representation of quantitative data that allows for the shape of the distribution to be easily seen, sorting data into "stems" and "leaves."

Interquartile Range

The difference between the 75th and 25th percentiles of a data set, representing the middle 50% of values.