6. Income Taxes

12 Months Ended

Aug. 31, 2016

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:

	2016	2015
Computed tax at the federal statutory rate	$  1,194,943	$  1,002,996
State taxes, net of federal benefit	169,869	144,893
Depreciation	(5,834)	16,473
Inventory reserve	32,269	33,216
Other	3,547	10,699
Provision for income taxes	$  1,394,794	$  1,208,277
Current income taxes	$  1,394,794	$  1,208,277
Deferred income taxes	(2,947)	(26,672)
Total income tax expense	$  1,391,847	$  1,818,605

Deferred income tax liability as of August 31, 2016 of $31,353 (August 31, 2015 – $34,300) 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.

	2016	2015
Deferred tax assets:
Allowance for inventory	$  78,237	$  66,745
Allowance for bad debts	-	-
Difference between book and tax depreciation	28,469	37,014
Total deferred tax assets	106,706	103,759
Valuation allowance	-	-
Net deferred tax assets	$  106,706	$  103,759
Net deferred tax liability	(138,059)	(138,059)
Combined net deferred tax asset (liability)	$  (31,353)	$   (34,300)