S2020 ACTG 6601 Midterm Exam - PART 2 (Case)-1
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York University
Schulich School of Business
ACTG 6601
Midterm Examination (Common)
May 16, 2020
Part 2 – Case
INSTRUCTORS: A. Garber, J. Pokrajac
INSTRUCTIONS (READ CAREFULLY): 1.
This exam (Midterm - Part 2) has 1 Case for a total of 50 marks
.
2.
The case was written with multiple "requireds" or "assessment opportunities" for you to address, including a Tax issue ("T") and a Financial Reporting issue ("FR"). Do not address these two issues (T and FR) in your analysis
, and focus on addressing all the other issues (excluding tax and financial reporting). However, if tax is relevant to some other issue, then you should incorporate tax into that issue as needed.
3.
You have 85 minutes in
total to complete this exam, allocated as follows:
5 minutes - access Canvas and download the exam question paper
75 minutes - prepare your response
5 minutes
- access Canvas and upload your response
85 minutes
4.
This exam commences at 10:35am and you must upload your response through Canvas by no later than 12:00pm. 5.
Late submissions will NOT be accepted and will receive a grade of NIL.
You are provided with extra time specifically for downloading and uploading your response, and hence you must plan and manage your time accordingly. 6.
Your response must be submitted as a single Word file
. You are allowed (and encouraged) to use Excel for any quantitative analysis necessary for your response; however, in order to facilitate marking in a remote environment, please "copy and paste" any relevant analysis you do in Excel into the Word file you submit. Cutting and pasting as a "picture" from Excel into Word works best. Please indicate your full name and student number at the top of the first page in your Word file. Responses not submitted in Word format (i.e. handwritten or PDF) will not be marked.
7.
Your Word file must be named in the following format:
"Lastname, Firstname - Student Number"
For example, if your legal name is Bob Smith and your student number is 123456789, you would save your Word file using the following filename: Smith, Bob - 123456789
8.
Only 1 file can be uploaded to Canvas under the "Midterm Part 2 - Case" tab, and the file you upload must be your Word file containing your response. No other files can be uploaded.
9.
As a safety measure, please also email your Word and Excel files to your instructor after you upload it to Canvas, by 12:00pm. Subject of email must be: “6601 Midterm Part 2 - Lastname, First name" GOOD LUCK!
Mock Common Final Examination Day 3 Page 1 Copyright © 2019 Densmore Consulting Services Inc. All rights reserved.
Case #1 (Suggested time 85 minutes) School Safe Inc. (SSI) provides bus transportation to students across Ontario. The students are SSI’s top priority and the company does everything possible to ensure their safety. The business operates through medium-term contracts awarded by local school boards to provide safe and reliable transport for students. SSI was family owned and operated until 2015 when the outstanding shares were bought by a large national corporation. SSI’s corporate tax rate is 26% and the company’s incremental borrowing rate is 5%. It is now October 2019. You, CPA, are SSI’s VP of Operations. You met with the CEO, Maya Passi. She told you that the Ministry of Transportation, Ontario (MTO) just enacted new safety standards for school bus operators that must be complied with by the beginning of the next school year. In May 2019, SSI successfully bid on and won a five-year contract with the Toronto School Board (TSB) for 450 additional routes. The contract limits the number of students per bus to 80. SSI will be responsible for costs incurred by the TSB due to unreasonable tardiness. SSI needs to upgrade its buses for the TSB contract to comply with the MTO’s new standards (Appendix I). Maya asked you to prepare a qualitative and quantitative analysis of the two options for upgrading the buses for the TSB contract, including the tax implications. Since its acquisition, SSI has maintained a focus on costs to increase operating margin and implemented several cost-cutting measures (Appendix II). Maya wanted to know how these measures have impacted SSI and whether the measures have successfully reduced costs. Given the increase in parent complaints (Appendix III), Maya wondered whether the cost-cutting measures are consistent with SSI’s vision, which is based on the following principles:
Safety – We only do what is safe.
Customers – We strive relentlessly to exceed customers’ expectations.
People – We respect the rights of all our employees and encourage exceptional performance. Maya explained that SSI is exiting contracts that fall below a minimum pre-tax profit margin of 20% per contract as dictated by head office. She asked you to update the TSB contract bid that was prepared in April 2019 (Appendix IV) to determine whether the contract still meets the minimum target.
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Tioman Fabricators, which builds offshore oil platforms, has been experiencing
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Derive the expected number of breakdowns.
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