Greyon Inc. operates an active business. Financial statements for the year ended December 31, 2021, report a net incomebefore taxes of $300,000. The following additional information is provided for 2021.1. Greyon's net income is summarized as follows:Income from business operations $280,000Gain on sale of capital assetsInterest on a bond investment15,000Building constructionHeating and cooling systemsLandscaping of grounds5,000$300.0002. During the year, Greyon completed construction of a new warehouse building and its cost of $600,000 was added to thebalance sheet. The cost consists of the following:$500,00080,00020,000$600,0003. Greyon's balance sheet includes an amount for goodwill acquired from a previous business acquisition. During the year, agoodwill impairment loss of $30,000 was deducted from the Income from business operations.4. Legal expenses, deducted in arriving at income from business operations, include $2,000 for drafting the mortgagedocument the new warehouse, $1,000 to Investigate a zoning limitation on the new warehouse site, and $5,000 for theaudit fee.5. A management bonus of $60,000 was announced and accrued in September. The bonus was paid in two equalinstalments on January 31 and April 30 of the following year, 2022. 00:0003. Greyon's balance sheet includes an amount for goodwill acquired from a previous business acquisition. During the year, agoodwill impairment loss of $30,000 was deducted from the income from business operations.4. Legal expenses, deducted in arriving at income from business operations, include $2,000 for drafting the mortgagedocument for the new warehouse, $1,000 to investigate a zoning limitation on the new warehouse site, and $5,000 for theaudit fee.5. A management bonus of $60,000 was announced and accrued in September. The bonus was paid in two equalinstalments on January 31 and April 30 of the following year, 2022.6. Advertising and promotion, deducted in computing income from business operations, includes $20,000 for airing a TVcommercial, $30,000 for production of the TV commercial, $5,000 for club memberships in a sports-related facility toenhance business contacts, and $12,000 for acquiring a permanent mailing list for seeking new customers.7. The income statement includes the following additional expenses:$41,0006,000AmortizationCharitable donationsVolume rebates and discounts on purchases13,000Architect's fee for design of new warehouse building 25,0008. Capital cost allowance has been correctly calculated as $58,000.Required:(a)Determine Greyon's business income for tax purposes for 2021.(b) Determine Greyon's net income for tax purposes in accordance with the aggregating formula.

Net income for tax functions refers to the earnings or earnings of a business entity that is used as…

Answered: net income

Business

Accounting

net income

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 47P

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