Sam runs a proprietorship that generated $75,000 in profits in 20X0.Included in these profits are: a)$10,000 of amortization expense; b)$5,000 bad debt expense; c)$55,000 cost of goods sold; and $8,000 meals and entertainment with clients.Sam's capital cost allowance has been accurately calculated at $8,500 for the year.How much is Sam's business income for tax purposes?

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Quizplus · Accepted Answer

Sam's business income for tax purposes is calculated by adjusting the accounting profit for tax purposes. The amortization expense of $10,000 is added back, and the capital cost allowance of $8,500 is deducted. Meals and entertainment are only 50% deductible, so $4,000 is added back. Therefore, the calculation is: $75,000 + $10,000 - $8,500 + $4,000 = $80,500.

Sam Runs a Proprietorship That Generated $75,000 in Profits in 20X0.Included