6. Income Taxes

12 Months Ended

Aug. 31, 2017

Notes

6. Income Taxes

6.             INCOME TAXES

A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:

	2017	2016
	$  1,516,880	$  1,194,943
Computed tax at the federal statutory rate	217,184	169,869
State taxes, net of federal benefit	(22,800)	(5,834)
Depreciation	39,357	32,269
Inventory reserve	7,982	6,494
Other
	$  1,758,603	$  1,397,741
Provision for income taxes
Current income taxes	$  1,758,603	$  1,397,741
Deferred income taxes	(20,009)	(2,947)
Total income tax expense	$  1,738,594	$  1,394,794

Deferred income tax liability as of August 31, 2017 of $11,344 (August 31, 2016 – $31,353) reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

	2017	2016
Deferred tax assets:
Allowance for inventory	$   116,300	$    78,237
Allowance for bad debts	1,294	-
Difference between book and tax depreciation	9,121	28,469
Total deferred tax assets	126,715	106,706
Valuation allowance	-	-
Net deferred tax assets	126,715	106,706
Net deferred tax liability	(138,059)	(138,059)
Combined net deferred tax liability	$    (11,344)	$   (31,353)