Microsoft Word - 2020-07-15 Final Exam Question 3 jm with typos fixed
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Apr 3, 2024
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This problem should take you 40 minutes to complete. An additional 10 minutes of extra time has been provided to allow you to submit your paper to the Question 3 Submission Link by 7:30 pm. No exceptions. We remind you that this exam is an independent, individual effort and that working with others during the exam is considered cheating under the York University Senate Policy on Academic Honesty
. Question 3 (22 marks, 40 minutes) released at 6:40 (50-minute deadline 7:30pm) Monika is a single parent living in Toronto. Her husband passed away a couple years ago and left her with residential rental properties. Between the rental income and her part time job with an annual salary of $30,000, Monika has sufficient income to provide for herself and her son, Shawn. Shawn is 12 years old. Monika receives $5,000 in worker’s compensation payments because of the accidental death of her husband. Monika has three residential rental properties across Ontario. The monthly financial information and 2019 opening UCC balances for each rental property is detailed below. Windsor Property
Kingston Property
Toronto Property
Rental income $ 3,500
$5,500
$4,100
Less: Utility fees paid 125
500
300
Less: Maintenance fees paid 550
1,200
750
Net rental income before interest expense & CCA $2,825
$3,800
$3,050
Mortgage Interest paid $750
$500
-
2019 Opening Class 1 UCC $ 325,000
$ 860,000
N/A
Monika purchased the Toronto property (a condominium) on July 1, 2019 for $600,000. Land transfer tax and legal fees incurred on the purchase of the property was an additional $30,000 and $5,000, respectively. The Toronto property has been rented since August 1, 2019, whereas the Windsor and Kingston properties were rented for the entire 2019 year. All rental properties are rented to arm’s length parties. Monika plans to sell the Windsor property in 2020. To help finance the purchase of the Toronto property, Monika took out a loan from RBC in the amount of $350,000 on July 1, 2019. The loan bears interest at a rate of 4.5% annually. Of this amount, $325,000 went toward the purchase of the Toronto property. Monika used the remaining $25,000 of the loan to purchase shares in a public company, FoodCo., with a total cost of $25,000. She paid the $7,875 interest owing in 2019 by December 31, 2019. continued on next page
2
This problem should take you 40 minutes to complete. An additional 10 minutes of extra time has been provided to allow you to submit your paper to the Question 3 Submission Link by 7:30 pm. No exceptions.
We remind you that this exam is an independent, individual effort and that working with others during the exam is considered cheating under the York University Senate Policy on Academic Honesty
. In 2019, Monika also earned income from her investment portfolio held at RBC:
Eligible dividends (cash amount) of $13,000,
Foreign dividends (cash amount after deducting $3,750 of foreign taxes) of $25,000.
Capital gains in the amount of $55,000. Monika also earned eligible dividends (cash amount) of $2,000 in her RRSP. Shawn’s only source of income in 2019 was from interest income of $3,200 from bonds that Monika gifted to Shawn back in 2016. In December 2019, Monika realized that her investment in FoodCo. was a really bad idea since the company declared bankruptcy in late November. As at December 31, 2019, her shares are worthless. This is not reflected in the investment income figures provided above. In September, Monika decided to go back to school full-time in the Fall 2019 semester. She received a scholarship of $5,000. You, a CPA, has been approached by Monika to assist in the preparation of her 2019 personal income tax return. Required: 1. Calculate Monika’s minimum net income for tax purposes and taxable income for 2019. Provide explanations for any items omitted from your calculation. In addition to these calculations: a. Monika would like to know what property (or properties) it is best to claim CCA on. Please explain your answer. b. Monika would like a detailed explanation regarding the deductibility of the RBC loan interest for 2019 and in future years. c. Monika would also like a detailed explanation of the treatment of the FoodCo. shares in 2019 and future years. 2. Monika has not contributed to her RRSP for quite some time. However, she plans to make a contribution to her RRSP in 2020. Monika has asked you to calculate her earned income for 2019 for RRSP purposes.
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- This window shows your responses and what was marked correct and Incorrect from your prevlous attempt. Required Informatlon Problem 13-63 & Problem 13-64 (Algo) (LO 13-5, 6, 7, 9) The following information applies to the questions displayed below] Jeremy Slacker started the Del Fuego Surf Shop on January 1 after determining that business school classes conflicted with his preferred activity. He invested $64,000 in the shop-$50,980 of his own savings and $32,000 borrowed from an acquaintance. The loan is to be repaid in 5 years. Jeremy will pay the lender annual interest at a rate of 8 percent. ded Shortly after opening, Jeremy realized that he is not the best financial planner and has come to you for help. With some prodding, you are able to establish that Jeremy plans to sell only two models of surfboard, the Zuma and the Coronado, for at least the first year. Data on the boards are given as follows, Coronado ) zuma 816 408 Expected annual sales (units) $720 470 $420 Retail price (per…arrow_forwardMake a note of any responses entered on this page in the last few minutes, then try to re-connect. Once connection has been re-established, your responses should be saved and this message will disappear. 020114022 AAUP - JENIN) y courses / AUDITING AND ASSURANCE SERVICES Section1 Lecture (20202 020114022 AAUP JENIN) / 10 July Time left 0: Determine the type of evidence we can get from this audit procedure. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative the preceding year. O a. Analytical procedure O b. Confirmation Oc. Physicals examination O d. Inspectionarrow_forwardThe Graduate Management Admission Test (GMAT) is a standardized exam used by many universities as part of the assessment for admission to graduate study in business. The average GMAT score for a university is 549. Assume that GMAT scores are bell-shaped with a standard deviation of 50. If required, round your answers to one decimal place. (a) What percentage of GMAT scores are 599 or higher? (b) What percentage of GMAT scores are 649 or higher? (c) What percentage of GMAT scores are between 499 and 549? (d) What percentage of GMAT scores are between 449 and 599?arrow_forward
- At freshman orientation, 1,500 students are asked to flip a coin 20 times. One student is crowned the winner (tossed 20 heads). This is most closely associated with A. selection bias. B. the lucky event issue. C. regret avoidance. D. overconfidence.arrow_forwardSuppose all incoming freshmen at a private college must take an entrance exam. Suppose the scores have normal distribution with a mean of U = 420 and standard deviation of σ = 95. (Show your work by indicating what calculator commands and input you use to find your answers. Round your answer to 1 decimal place.) No Work No Crédit. 1. If a student scores in the bottom 8%, they must attend summer school. What would a student have to score to avoid summer school? Sketch a corresponding normal curve in your solution. Interpret your answer in a complete sentence. 2. If a student scores in the top 4%, they get a free vacation in Hawaii. What would a student have to score to get the vacation? Sketch a corresponding normal curve in your solution. Interpret your answer in a complete sentence.arrow_forwardAcademic Dishonesty Investigations Ltd. operates a plagiarism detection service for universities and colleges. Required: 1. Prepare journal entries for each transaction below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. On March 31, ten customers were billed for detection services totalling $40,000. b. On October 31, a customer balance of $2,400 from a prior year was determined to be uncollectible and was written off. c. On December 15, a customer paid an old balance of $1,650, which had been written off in a prior year. d. On December 31, $1,050 of bad debts were estimated and recorded for the year. 2. Complete the following table, indicating the amount. Ignore income taxes. (Enter any decreases with a minus sign.) Net Receivables a.bcd Net Sales Income from Operationsarrow_forward
- Data Recovery Services (DRS) specializes in data recovery from crashed hard drives. The price charged varies based on the extent of damage and the amount of data being recovered. DRS offers a 10% discount to students and faculty at educational institutions. Consider the following transactions during the month of June. June 10 Rashid's hard drive crashes and he sends it to DRS. 12 After initial evaluation, $3,000. June DRS e-mails Rashid to let him know that full data recovery will cost June 13 Rashid informs DRS that he would like them to recover the data and that he is a student at UCLA, qualifying him for a 10% educational discount and reducing the cost by $300 (= $3,000 x 10%). 16 DRS performs the work and claims to be successful in recovering all data. within 30 days of today's date, offering a 2% discount for payment within 10 days. June DRS asks Rashid to pay June 19 When Rashid receives the hard drive, he notices that DRS did not successfully recover all data. Approximately 30%…arrow_forwardThese problems illustrate the application of Little’s Law. 1. Suppose that a voting facility processes an average of 57 people per hour (throughput) and that, on average, it takes 35 minutes for each person to complete the voting process (flow time). 2. Suppose that the loan department of a bank takes an average of 15 days (0.5 months) to process an application (flowtime) and that an internal audit found that about 100 applications are in various stages of processing at any one time (work-in-process). 3. Suppose that a restaurant makes 350 pizzas per week, each of which uses 1/2 pound of dough, and that it typically maintains an inventory of 60 pounds of dough. Open the spreadsheet and perform the required analysis to answer the questions below. 1. What is the work-in-process for the problem 1? Round your answer to two decimal places. ______ voters 2. What is the throughput (per month) for the problem 2? Round your answer to the nearest whole value. ____________ applications per…arrow_forwardPlease watch the following video, which introduces you to the concepts of horizontal and vertical analysis. The first 6 minutes defines these concepts, after which the professor in the video discusses an example of their usefulness for assessing theft and locating unrecorded revenues. Accounting: Horizontal & Vertical Analysis (13:13 min) Once you have watched the video, write a paragraph that includes the following components: Define horizontal and vertical analysis in your own words. Explain why horizontal and vertical analysis can be valuable to a company. Describe how it might apply to either your own employer or another business you know of.arrow_forward
- FOR THIS QUESTION IN THE ETHICAL THREAT BOX COULD YOU WRITE DOWN WHAT THREAT IT IS FOR EXAMPLE, SELF INTEREST THREAT, FAMILARITY THREAT, MANAGMENT THREAT, ETC. PART B - QUESTION KLB plc is one of your audit clients for the previous 8 years. The following information are available. The audit team included a manager and two juniors. The client was asking to finish the audit work early this year otherwise they are going to change the auditor next year. One-week bonus was paid to the audit team through their payroll as the client was happy that they finished auditing 5 days earlier than the planned audit time. The audit team got 10% discounts on the client’s products. The same discount is normally given to the client’s staff. Your firm offered this client a bookkeeping service for this year. To reduce the audit cost, the engagement letter was not updated this year as there is no big changes in the audit tasks from last year. Audit fees are based on a percentage of the net profit before…arrow_forwardData Recovery Services (DRS) specializes in data recovery from crashed hard drives. The price charged varies based on the extent of damage and the amount of data being recovered. DRS offers a 15% discount to students and faculty at educational institutions. Consider the following transactions during the month of June. June 10 Rashid’s hard drive crashes and he sends it to DRS. June 12 After initial evaluation, DRS e-mails Rashid to let him know that full data recovery will cost $2,200. June 13 Rashid informs DRS that he would like them to recover the data and that he is a student at UCLA, qualifying him for a 15% educational discount and reducing the cost by $330 ( = $2,200 × 15%). June 16 DRS performs the work and claims to be successful in recovering all data. DRS asks Rashid to pay within 30 days of today’s date, offering a 4% discount for payment within 10 days. June 19 When Rashid receives the hard drive, he notices that DRS did not successfully recover all data.…arrow_forwardMr. Henry Dominic, Director of Dominic CPA Review Schools was considering the use of a new practice at the end of the two-week introductory portion of his class. The set was designed to meet two principal objectives. First, he hoped that it would serve as a screening device for identifying those students who had failed to grasp some of the more elementary concepts of financial accounting. Second, the set was designed to serve as a vehicle for introducing several new concepts which would be covered in more depth in the next section of this course. The beginning of the year balance sheet for the green Ville Company was as follows: Cash.. Inventory.. ASSETS Total current Assets.... Property, plant and eqpt.... Less: A/D PPE.. Net Fixed Assets.. Total Assets............ FINANCIAL REPORTING June 1 GREEN VILLE COMPANY Balance Sheet As of January 1, 2021 P25,000 10,000 35,000 15,000 5,000 10,000 P45,000 EQUITIES Accounts payable......... .P10,000 Total Current Liabilities..... 10,000 Capital…arrow_forward
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