TAXX 401v35
TAXX 401v35: Assignment 1 – Solutions Solution to AP 12-10
(55%) Canadian Tax Principles - Athabasca University |
Latest (2026/2027) Updated Version
THIS DOCUMENT CONTAINS:
❖TAXX 401v35
❖Assignment 1
❖Solutions Solution to AP 12-10 (55%)
❖Canadian Tax Principles
❖Athabasca University
❖Latest (2026/2027) Updated Version
, Assignment 1 Solutions to Taxx401 Version 33
(2026/2027 Canadian Tax Principles)
Solution to AP 12-10 (55%)
Note to Instructors: There are two points:
(1) We added a statement in the lease of the warehouse commentary clarifying that the
expenditures fall within Class 13. This is to ensure that the expenditures are not treated
as Class 1 costs as a result of ITR 1102(5).
(2) Since the ART is not covered until Chapter 13 but is relevant to the income tax
calculations in this problem, we have provided both the AII and the ART tax to be
included.
Part A - Net Income
The calculation of Kalex’s 2026 net income would be as follows:
Accounting Net Income before Income Tax $2,481,986
Additions, Including Relevant Problem Part:
Current Income Tax Expense $ 325,000
2 Amortization expense 615,000
3 Theft insurance (Note 1) 2,850
5 Prepaid advertising (Note 2) 24,800
6 Charitable donations 17,400
7 Non-deductible meals & entertainment [(50%)($62,500)] 31,250
8 Life insurance premiums paid on the four shareholders 22,000
10 Capital renovations to the Toronto building 112,000
12 Penalties paid on late corporate income tax instalments 2,900
13 Interest on late municipal tax payments (Note 3) Nil
17 Warranty expense reserve 16,275
2021 Doubtful debt reserve 30,900
Non-deductible accounting bad debts reserve (Note 4) 33,750
Recapture on Class 8 (See Note 9) 52,000
Taxable Capital Gain on Vacant Land (Note 7) 50,435
Accrued interest on amounts owing on vacant land 16,500
(Note 5)
Foreign Business Income Tax not adjusted 77,900
Loss on sale of Jennco Shares (Note 6) 116,600
16 Golf Club Membership Fees 19,300 1,566,860
$4,048,846
Deductions:
1 Bond Premium Amortization ($ 8,800)
9 Capital Dividend (Tax Free) (40,000)
2022 Doubtful debt reserve (28,800)
Allowable Business Investment Loss (58,300)
(50% of $116,600)
(See note 6)
CCA (Note 9) (1,718,821)
TAXX 401v35: Assignment 1 – Solutions Solution to AP 12-10
(55%) Canadian Tax Principles - Athabasca University |
Latest (2026/2027) Updated Version
THIS DOCUMENT CONTAINS:
❖TAXX 401v35
❖Assignment 1
❖Solutions Solution to AP 12-10 (55%)
❖Canadian Tax Principles
❖Athabasca University
❖Latest (2026/2027) Updated Version
, Assignment 1 Solutions to Taxx401 Version 33
(2026/2027 Canadian Tax Principles)
Solution to AP 12-10 (55%)
Note to Instructors: There are two points:
(1) We added a statement in the lease of the warehouse commentary clarifying that the
expenditures fall within Class 13. This is to ensure that the expenditures are not treated
as Class 1 costs as a result of ITR 1102(5).
(2) Since the ART is not covered until Chapter 13 but is relevant to the income tax
calculations in this problem, we have provided both the AII and the ART tax to be
included.
Part A - Net Income
The calculation of Kalex’s 2026 net income would be as follows:
Accounting Net Income before Income Tax $2,481,986
Additions, Including Relevant Problem Part:
Current Income Tax Expense $ 325,000
2 Amortization expense 615,000
3 Theft insurance (Note 1) 2,850
5 Prepaid advertising (Note 2) 24,800
6 Charitable donations 17,400
7 Non-deductible meals & entertainment [(50%)($62,500)] 31,250
8 Life insurance premiums paid on the four shareholders 22,000
10 Capital renovations to the Toronto building 112,000
12 Penalties paid on late corporate income tax instalments 2,900
13 Interest on late municipal tax payments (Note 3) Nil
17 Warranty expense reserve 16,275
2021 Doubtful debt reserve 30,900
Non-deductible accounting bad debts reserve (Note 4) 33,750
Recapture on Class 8 (See Note 9) 52,000
Taxable Capital Gain on Vacant Land (Note 7) 50,435
Accrued interest on amounts owing on vacant land 16,500
(Note 5)
Foreign Business Income Tax not adjusted 77,900
Loss on sale of Jennco Shares (Note 6) 116,600
16 Golf Club Membership Fees 19,300 1,566,860
$4,048,846
Deductions:
1 Bond Premium Amortization ($ 8,800)
9 Capital Dividend (Tax Free) (40,000)
2022 Doubtful debt reserve (28,800)
Allowable Business Investment Loss (58,300)
(50% of $116,600)
(See note 6)
CCA (Note 9) (1,718,821)
