adionFaux Industries Ltd

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adionFaux Industries Ltd. (RIL) is a Canadian

controlled private corporation, located at 123

ABC Street in Ottawa, Ontario K4E 1A1. Its On

tario Corporation tax account number is

1234567. Its phone number is (613) 111-1111. It was incorporated on February 24, 1990 in

Ottawa.

Thegovernment'sCrownCopyrightnolongerpermitsustousefakeBusinessNumbersinsoft

-

ware problems. To reduce the number of ProFil

e's error messages because of this, enter NR

(for not registered) in the Business Number field.

TheCompanyhas1,000sharesofcommonstockissuedandoutstanding,allofwhichareheld

by Margaret Ottawa (SIN 527-000-301).

Ms. Ottawa, the president and director of the Company, is the person who should be

contacted with respect to matters concerning the Company's books and records. She is the

authorized person as well as the signing officer.

RIL is a retailer of pet supplies. All of its sales occur within Canada. It has net assets of

$235,000 on December 31, 2018. This includes a few

investments that Ms. Ottawa inherited

from her father two years earlier.

RIL owns all of the 500 common shares of OttawaFaux Inc., which holds most of the invest-

ments Ms. Ottawa inherited from her father. The common shares have a book value of

$1,200,000. OttawaFauxInc.hasthesamelocati

onandphonenumberasRadionFauxIndus-

tries Ltd. OttawaFaux Inc. has a December 31 fisc

al year end. Enter NR (for not registered) in

the Business Number field for OttawaFaux Inc.

OttawaFaux Inc. is also involved in earning active business income through the breeding and

sale of championship dogs. It has total assets of $2,000,000 and total revenues for 2018 of

$200,000. Its Taxable Capital Employed I

n Canada was $350,000 as at December 31, 2017,

and $365,000 as at December 31, 2018.

The following information applied to RIL:

Taxable Capital Employed In Canada - 2017 $328,000

Taxable Capital Employed In Canada - 2018 411,000

Total Assets As At December 31, 2018 750,000

RDTOH As At December 31, 2017 5,200

Dividends Declared And Paid During 2017 Nil

GRIP Balance As At December 31, 2017 11,750

Capital Dividend Account As At December 31, 2017 6,000

RIL does not use International Financial Reporting Standards (IFRS). For the taxation year

ending December 31, 2018, RIL's Income Stateme

nt, before any deduction for income taxes,

wasasfollows:

Tax Software Assignment Problem Fourteen - 1

(Updated For 2018) Page 1

 

Sales Revenues $580,000

Interest On Long-Term Debt 27,500

Interest Received On Foreign Bank Account (Note 1) 18,000

Eligible Dividends On Royal Bank Shares 17,500

Non-Eligible Dividends From OttawaFaux Inc. (Note 2) 42,000

Gain On Sale Of Shares (Note 3) 27,000

Total Revenues $712,000

Cost Of Goods Sold $208,000

Amortization Expense 122,000

Other Operating Expenses 147,000

Total Expenses (Excluding Taxes) $477,000

Net Income (Before Taxes) $235,000

Note 1

This interest is net of $2,000 in taxes withheld in Ireland.

Note 2

As a result of paying this $42,000 in dividends to RIL, OttawaFaux Inc.

received a dividend refund of $14,000.

Note 3

On March 23, 2018, RIL sold 2,700 shares of Canadian Imperial Bank of

Commerce. The common shares had cost $118,800 on June 6, 2015 and were sold

for net proceeds of $145,800.

Other Information

:

1. Expensesincludeadeductionfor charitable

donationstotheOttawaCivicHospital inthe

amount of $5,000.

2. RIL's Expenses include penalties of $3,500

resulting from a judgment in the Tax Court Of

Canada.

3. RIL reimbursed Ms. Ottawa $34,000 for business meals and entertainment for clients and

suppliers during the year.

4. During the year, RIL incurred $20,000 in la

ndscaping costs. For accounting purposes

these are being treated as a capital asset, to be amortized using the straight-line method

over10years. TherelatedamortizationisincludedintheAmortizationExpenseshownon

the Income Statement.

5. TheopeningUCC balanceswere$246,000 for Class1, $135,000 for Class8 and $90,000

for Class 10. The only fixed asset disposition during the year was the sale of a delivery

truck. The truck had cost $35,000 and was sold for its net book value of $12,000. The

only fixed asset acquisition was $52,

000 in office furniture on April 1, 2018.

6. During 2018, RIL paid taxable dividends o

f $92,000. Of these dividends, $25,000 was

designatedaseligible. OnSeptember1,2018,RILalsoelectstopaythemaximumcapital

dividend allowable.

7. RILallocates$60,000oftheannualbusinesslimittoOttawaFauxInc. Thisis$5,000more

than OttawaFaux Inc. can utilize in 2018, but RIL cannot use the excess.

8. RIL paid quarterly income tax instalments of $8,000 each on the 20th of March, June,

September and December during 2018.

9. RIL has a website describing the products i

t carries, but no income is generated from the

website.

Required

: Prepare the federal corporate tax return for RIL for the 2018 taxation year using

theProFileT2corporatesoftwareprogram. OntheProFilescheduletitled"Info",theFiling

question "Complete return from GIFI?" is answered Yes by default, click No