Russ Major, CPA, drafted the following report on October 25, 2015 at the completion of the engagement to compile the financial statements of Ajax Company for the year ended September 30, 2015. Ajax is nonpublic organization in which Major's child has a material direct financial interest. Ajax decided to omit substantially all of the disclosures required by GAAP becasue the financial statements will be only for mangement's use. The statement of cash flows was also omitted because management does not believe it to be a useful financial statement. Identify the deficiencies contained in Major's report on the compiled financial statements. Group the deficiencies by paragraph when applicable. Do not redraft the report. To the Board of Drictors of Ajax Company: I have complied the accompanying financial statements of Ajax Company as of September 30, 2015, and for the year then ended. I planned and performed the compilation to obtain limited assurance about whether the financial statements are free of matrial misstatements. A compilation is limited to presenting information in the form of financial statements. It is substantially less in scope thatn an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. I have not audited the accompanying financial statements and, accordingly, do not express any opinion on them. Management has elected to omit substantially all of the disclosures required by generally accpeted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and changes in financial position. I am not independent with respect to Ajax Company. This lack of of independence is due to my child's ownership of a material direct financial interest in Ajax Company. This report is intended solely for the information and use of the Board of Directors and management of Ajax Company and should not be used for any other purpose.

A plant asset acquired on October 1, 2022 at a cost of $800,000 has an estimated useful life of 10 years. The salvage value is estimated to be $50,000 at the end of the asset's useful life.

Instructions

Determine the depreciation expense for the first two years using the:

(a)     straight-line method.

(b)     double-declining-balance method.

The ABC Company bought a new machine on October 1, 2014 for $110,000. It planned to keep the truck for four years at which time it expected to sell the truck for $30,000. The company elected to amortize the truck for financial reporting purposes using the declining balance method with an annual rate of 30%. The company has a December 31 year-end and a corporate income tax rate of 40%. For tax reporting purposes, you may pick one of the following:

·       The company US-based and is required to determine tax depreciation for reporting to the taxation authority using the MACRS 10-year category, or

·       The company is Canadian-based and is required to determine capital cost allowance for reporting to the taxation using a CCA pool rate of 20%.

     Calculate the following for both the years 2014 and 2015:

A.   The depreciation expense for the truck that would be shown on the company's income statement

B.   The amount of tax depreciation (US) or CCA (Canada) that would be claimed, and

C.   the change in deferred taxes.

Canberra acquired all of the equity shares in Yass on 1 October 2019, for consideration of $2,150 million. The carrying amount of identifiable net assets at acquisition was $2,130 million, which was the same as the fair value. Canberra is actively selling its entire shareholding in Yass as a single transaction and has classified the investment as a disposal group held for sale, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, for the year ended 30 September 2020. The carrying amounts of the net assets of Yass in the individual financial statements of Canberra at 30 September 2020, before classification as held for sale, were ($ million):

Canberra measures properties at fair value, in accordance with IAS 16 Property, Plant and Equipment. No revaluations had been recognised on acquisition, when the estimated fair values were substantially the same as the carrying amounts. Properties with a carrying amount of $630 million were revalued to fair value of $680 million, at 30 September 2020. This fair value change has not been recognised in the financial statements. The total fair value less costs to sell of the disposal group was estimated as $2,140 million, at 30 September 2020. No impairments had been recognised previously, to the goodwill of Yass.

Yass owns and operates private hospitals and the medical sector is highly regulated. Canberra is confident that the sale of Yass will be agreed shortly after 30 September 2020. Any purchaser will require regulatory approval, which could delay completion of the sale until after 30 September 2021. Regulatory approval cannot be sought by a purchaser until a contract of sale had been agreed. Yass will continue to operate the hospitals until the sale is completed. Canberra will sell all of the shares in Yass to the purchaser, who would obtain all of Yass’s rights and obligations. Yass does not intend to sell or acquire any significant assets or liabilities prior to completion of the sale, as that would affect the value of the shares being sold.

Required:

Discuss the correct recognition and measurement of the investment in Yass in the consolidated financial statements, for the year ended 30 September 2020. Provide calculations.     

Alex is a carpenter who purchased a vacant block of land in Sydney on 1 October 1980. On 1 September 1986, Alex built a house on the land. At the time, the land was valued at $110,000 and the cost of construction was $100,000. Immediately, after the construction finished, the property has been rented out. On 1 March 2019, Alex sold the property at auction for $1,400,000. With reference to relevant legislation/case law determine: (A) Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method. (B) How would your answer to (A) differ if the owner of the property was a company instead of Alex?

A. Alex purchased a CNC machine on 1st October 2019 at a cost of $110,000 (including GST). This machinery is estimated to have a useful life of seven years.

B. Alex purchased a Holden car on 1 May, 2019 at a cost of $63,000, estimated to have a useful life of five years.

Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the Holden car discussed above, using both Prime cost and Diminishing value methods.

In October of the current year, Jasmine received a $15,520 payment from a client for 32 months of rent. The rental period begins on September 1 of this year. This amounts to $485 per month. Jasmine is a calendar-year taxpayer.

What amount of the $15,520 payment, if any, must Jasmine recognize this year if she uses the accrual method of accounting?

Numeric Response ?

Question

A. Alex purchased a CNC machine on 1st October 2019 at a cost of $110,000 (including GST). This machinery is estimated to have a useful life of seven years.

B. Alex purchased a Holden car on 1 May, 2019 at a cost of $63,000, estimated to have a useful life of five years.

Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the Holden car discussed above, using both prime cost and diminishing value methods. (10 marks, maximum 200 words)

) On October 6, 2020, the US President abruptly tweeted that the White House is pulling out of ongoing negotiations on a new stimulus bill intended to address covid19 pandemic’s impact on the economy. All stock market indices immediately dropped by more than 1%. Was this movement consistent with market efficiency? Why, or why not?

Construction of a new building began on April 1 and was completed on October 29. Construction expenditures were as follows:

MMI borrowed $5,000,000 at 6% on April 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $6,650,000, 8% long-term note payable outstanding throughout 2021.

Weighted Average Accumulated Expenditures were: [Round expenditure to nearest dollar]

**According to ASC 835-20-15-8, “If activities are undertaken for the purpose of developing land for a particular use, the expenditures to acquire the land qualify for interest capitalization while those activities are in progress. The interest cost capitalized on those expenditures is a cost of acquiring the asset that results from those activities. If the resulting asset is a structure, such as a plant or a shopping center, interest capitalized on the land expenditures is part of the acquisition cost of the structure.”