6. Income Taxes

12 Months Ended

Aug. 31, 2014

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:

	2014	2013
Computed tax at the federal statutory rate	$  1,056,815	$  1,544,074
State taxes, net of federal benefit	154,111	226,146
Depreciation	12,253	15,347
Inventory reserve	5,952	(4,167)
Deferred Gain – Land Sale	-	138,059
Other	27,646	13,447
Provision for income taxes	$  1,256,777	$  1,932,906
Current income taxes	$  1,246,198	$  1,780,940
Deferred income taxes	10,579	151,966
	$  1,256,777	$  1,932,906

Deferred income tax liability as of August 31, 2014 of $60,972 (August 31, 2013 – $50,393) reflect 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.

	2014	2013
Deferred tax assets:
Allowance for inventory	$    58,576	$     82,087
Allowance for bad debts	0	0
Difference between book and tax depreciation	18,511	5,579
Total deferred tax assets	77,087	87,666
Valuation allowance	0	0
Net deferred tax assets	$    77,087	$     87,666
Net deferred tax liability	(138,059)	(138,059)
Combined net deferred tax asset (liability)	$  (60,972)	$   (50,393)