Question 1

Mark is a commission based sales person. His primary work is away from the head office. Mark's employers signed a T2200 form certifying that no reimbursements are paid for any expenses Mark incurs to earn commissions. Mark incurs the following expenses, exclusively for business use: Meals and Entertainment 15,000 Fuel 5,000 Insurance 1,000 Repairs 1,500 Lease on Car 500/month What are Mark's deductible employment expenses? options:

1) 10,000

2) 15,250

3) 28,500

Question 2

Which one of the following would be considered employment income for Canadian income tax purposes?

1) A private health services plan premium paid by your employer.

2) An all-expense-paid trip to Europe provided to you by a supplier of your company for reaching a sales quota.

3) Amounts paid by your employer for counselling services in respect of mental and physical health.

4) Benefits paid by your employer to a deferred profit sharing plan that does not pay out until 2024.

Question 3

Bill is the CEO of ABC Ltd. Bill takes his wife, Mary, on a three-day convention. Mary represents ABC Ltd. at the convention, and hands out brochures and gives a talk on motivational speeches, but she is not an employee of Bill's company. Which of the following statements is true for 2018?

1) No employee benefits will be added to either Bill's or Mary's income since Mary was primarily engaged in business activities on behalf of Connection Ltd.

2) Fifty per cent of the trip's cost for Mary would be added to Bill's employment income because she is not an employee of the company.

3) The cost of the hotel for Bill's wife would be added to Bill's employment income because she is not an employee of the company; thus, a personal benefit was received.

4) The cost of the trip for Mary would be added to her personal tax return as employment income even though she is not a regular employee of the company.

Question 4

Sandy is given the choice to receive a pay raise, either as a salary increase of $7,200 or as a benefit of a company leased car that will cost her employer $600 per month to rent, including HST. Sandy has come to you for advice so that she can minimize her employment income and thereby minimize her taxes. Which of the following statements is true?

1) Sandy should accept the salary.

2) Sandy should be indifferent between the two choices.

3) Sandy should ask her employer to lease a cheaper car and then pay the difference between the monthly leasing costs as part of her salary.

4) Sandy should accept the leased automobile.

Question 5

Which of the following statements is true regarding employment income?

1) All allowances and reimbursements received are taxable.

2) Some allowances are taxable but no reimbursements received are taxable.

3) All allowances and some reimbursements are taxable.

4) Some allowances and some reimbursements are taxable.

Question 4 Jerry is the area co-ordinator for a State-wide community services program. Jerry has been in the job for five years now and knows the ins and outs of the program well. His job requires him to travel to each of the service delivery centres throughout the State to provide training and support to staff. Because of his experience in the program he is often called to provide advice of how to deal with various crisis situations. He is always busy and frequently stressed. There never seems to be enough time to get things done. He has paperwork everywhere – usually before each trip he throws all the relevant files in the back of the car but frequently gets to his location finding he has the wrong files. He does his paperwork in the evenings in his hotel room – there isn’t time during the day – he is too busy talking with staff, doing training, sorting out issues and dealing with phone calls. Sometimes he is so tired he doesn’t get his notes written up in the evenings – then he has to do it when he gets home several days later – sometimes he can’t even remember then what the issues are. Once he even turned up at the wrong centre! He was meant to be in Heathcote but he ended up in Northcote! His job seems to be out of control – he used to love it and he knows that he is well respected for his knowledge and experience – but he is not sure how long he will be able to keep this up.

a)What are some time management and other organisational strategiesthat Jerry could use to manage his work time better?(Suggest at least five)

Question 4 b
One of the disadvantages of life “on the road” is that Jerry does not tend to get much exercise (he is seldom home so he let his gym membership expire) and he eats a lot of takeaway food. He knows this isn’t very good for him but he is far too busy to exercise and cook for himself!
b)What impact could this lifestyle have on Jerry’s physical health? (List at least five health impacts).

Question 4c
Jerry doesn’t have a very good work/life balance. He is either travelling around the State or if he is at home he is bored and lonely. His marriage split up a year ago (because his wife said he was never home) and his daughter doesn’t seem to want to see him (she is a teenager now and seems to have a life of her own).
c)What could Jerry do to improve his work/life balance (Suggest five things).

Mrs. Cunningturkey works at Mabash College as an executive assistant to the universally reviled President Less. President Less is widely known to care nothing about students, and every day chooses a random student car to tow away and crush for scrap metal.

On Monday morning, Mrs. Cunningturkey arrives to President Less’ office promptly at 0750. There she discovers the corpse of President Less and the murder weapon: a chicken leg from the nearby Starks Center. The body shows clear signs of blunt force trauma. At 0800, detectives from the Trawfordshire Police Department arrive and begin an investigation. The coroner notes that the temperature of the corpse is 32◦C and that the room temperature is 25◦C. Two hours later, the corpse is 31◦C. Assume that normal human body temperature is 37◦C.

The following people were seen in the vicinity of President Less’ office over the weekend:

• Professor Trix, who sometimes smokes cigars with President Less, was noticed leaving the building at 2200 the night before. However, President Less recently smoked a bunch of the professor’s favorite Cubans without him.

• Major Mustard, who is in charge of the Car Towing and Crushing Brigade, was seen in the parking lot at 2100 the night before. Major Mustard and President Less recently had an argument about money raised from the towing and crushing business. Major Mustard was especially concerned with the fact that another university’s towing and crushing business might ketchup.

• Muscles McTouchdown, captain of the football team and recent tow/crush victim, was seen running across campus towards the Beta Rho Omicron fraternity at midnight. He was overheard muttering “I’ve got him this time!

• Mark Bosak, a frequent critic of President Less in the campus publication The Spouseless, was seen walking in the direction of President Less’ office at 0100.

Investigators from the Trawfordshire Special Mathematics Unit also become involved, since mathematical crimes are considered especially heinous (these are their stories). They discover that President Less had been secretly embezzling funds from the tow/crush scheme. In 2018, he decided to take money he had made from the scheme and park it in two different banks:

• $10,000 with Tax-Dodge Bank, of the Cayman Islands. The account pays 5% interest compounded monthly.

• $15,000 with Euler Bank, based in Switzerland. This account pays only 4% but, befitting the name, compounds continuously.

(1) How fast is the body cooling at 0800? At 1000?

(2) Who is your chief suspect for the murder of President Less, and why?

(3) How much money will be in both secret bank accounts after 25 years?

Submit your evidence to your instructor by 1600 Friday. Your writing and exposition should be clear and concise, and good enough that a juror who knows some calculus (but not about Newton’s Law of Cooling or compound interest) would be able to read it!

In respect of each benefit you are required to:

• specify the category and the applicable division of the Fringe Benefits Tax Assessment Act 1986 (FBTAA);
• provide section references of the FBTAA for each part of your calculation; and
• indicate whether the benefit is a Type 1 or Type 2 benefit and state the reason.

Reasons for any exclusions must also be provided.

Your working papers must be typed using Excel or Word. The FBT return may be handwritten. An Excel worksheet has been provided to help you to set out your assignment.

World’s Best Gifts Pty Ltd (WBG) is a company resident in Australia. Its business is the sale of unusual and original giftware. In addition to providing giftware to boutique gift stores in Perth it also has salespeople who drive to rural areas to sell its giftware to shops in country areas. Its turnover is above $10 million.

It provides the following to its staff in the FBT year ended 31^st March 2020.

Parking was provided on-site to 12 staff. There were three commercial parking stations within one kilometre. One charges $15 per day but by the end of the year had increased this to $18 per day, one charges $18 per day, and one charges $10 per day. Staff paid $5 per week towards their on-site parking.

Taxi fares for the head of the IT division. She had never learned to drive. WBG paid $10,000 in taxi fares during the year. 85% of the trips were to and from work, however, she used the remaining vouchers to travel privately after hours.

An end-of-financial year party was held at a 5-star hotel. All 50 staff attended and 40 of them brought a partner. The party cost $280 per head. The business used the actual method to calculate the entertainment FB.

Notes:

The company does not qualify as a SBE.

The company has paid GST where it is liable to do so and all amounts shown are GST-inclusive.

One of Vivienne’s major clients in a regional area renowned for its beautiful resort provides her with a weekend stay which included accommodation and food, airline tickets and tickets to a concert with an international act. The cost of this package was $8,500 and Vivienne and her daughter attended. This was offered to her as she had developed a rapport with her client and sourced interesting giftware to be sold in the resort. It was always very expensive and very exclusive giftware. The client was very appreciative of the special service provided by Vivienne. WBG was aware that Vivienne and her daughter would attend this function and that it was being provided free of charge.

REQUIRED:

Complete working papers showing how you have calculated the taxable value of each benefit provided. Include in your working papers references to the FBT legislation for each benefit provided and provide reasons and explanations for any items which you exclude from the calculations. Calculate the FBT payable by World’s Best Gifts Pty Ltd.

A random sample of 376 married couples found that 296 had two or more personality preferences in common. In another random sample of 586 married couples, it was found that only 20 had no preferences in common. Let p₁ be the population proportion of all married couples who have two or more personality preferences in common. Let p₂ be the population proportion of all married couples who have no personality preferences in common.

(a) Find a 95% confidence interval for p₁ – p₂. (Use 3 decimal places.)

Most married couples have two or three personality preferences in common. A random sample of 362 married couples found that 136 had three preferences in common. Another random sample of 552 couples showed that 214 had two personality preferences in common. Let p₁ be the population proportion of all married couples who have three personality preferences in common. Let p₂ be the population proportion of all married couples who have two personality preferences in common.

(b) Find a 99% confidence interval for p₁ – p₂. (Use 3 decimal places.)

The U.S. Geological Survey compiled historical data about Old Faithful Geyser (Yellowstone National Park) from 1870 to 1987. Let x₁ be a random variable that represents the time interval (in minutes) between Old Faithful eruptions for the years 1948 to 1952. Based on 9780 observations, the sample mean interval was x₁ = 61.4 minutes. Let x₂ be a random variable that represents the time interval in minutes between Old Faithful eruptions for the years 1983 to 1987. Based on 24,053 observations, the sample mean time interval was x₂ = 69.4 minutes. Historical data suggest that σ₁ = 9.47 minutes and σ₂ = 11.57 minutes. Let μ₁ be the population mean of x₁ and let μ₂ be the population mean of x₂.

(c) Compute a 99% confidence interval for μ₁ – μ₂. (Use 2 decimal places.)

A study of parental empathy for sensitivity cues and baby temperament (higher scores mean more empathy) was performed. Let x₁ be a random variable that represents the score of a mother on an empathy test (as regards her baby). Let x₂ be the empathy score of a father. A random sample of 40 mothers gave a sample mean of x₁ = 68.87. Another random sample of 38 fathers gave x₂ = 60.70. Assume that σ₁ = 11.41 and σ₂ = 11.41.

(d) Let μ₁ be the population mean of x₁ and let μ₂ be the population mean of x₂. Find a 99% confidence interval for μ₁ – μ₂. (Use 2 decimal places.)

As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.
Year
₵

0
(100,000)

1
20,000

2
25,000

3
32,000

4
35,000

Using the CAPM approach, what is the cost of equity on this project?
[2 marks]
Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? [2 mark]
What will be the weighted average cost of capital (WACC)? [2 mark]
Using the WACC computed in (c), what will be the NPV of the investment? ` [3 marks]
Compute the IRR for the project? [3 marks]
What will be your overall advice concerning viability of the project?
[2 marks]

Mr. Norman and Mr. Foster are both investors looking to buy financial assets. Mr. Norman prefers assets with the lowest prices while Mr. Foster prefers assets on the financial market with higher prices. Each of them currently has GHC 1,000 to invest and needs your assistance to know which asset to buy to suit their preference. The following information provides details of investment options.
Asset A is a bond with a coupon rate of 10% and pays semi-annual coupons. The par value is GHC 1,000, and the bond has 5 years to maturity. The yield to maturity is 11%.
Asset B is a stock whose dividend is expected to increase by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. The last dividend was GHC 100 and the required return is 20%.
Which asset will Mr. Norman and Mr. Foster invest in? [8 marks]

In the 2020 accounting year, investors made a number observations in terms of certain decisions some corporations were taking:
(i) The board of directors of some manufacturing and services companies decided to pay stock dividends instead of cash dividends;
(ii) On the other hand, the board of directors of majority of companies within the ICT industry decided to pay special cash dividends;
(iii) It was also observed that some the management of some companies had decided to repurchase shares while others were engaging in stock splits.

What could be the reason for these three decisions and choice of dividend payments by the boards of these companies and what will be the effect of such decisions on the outstanding number of shares and the share prices of these companies? [8 marks]

Each year a certain magazine publishes a list of "Best Places to Live in the United States." These listings are based on affordability, educational performance, convenience, safety, and livability. Suppose the list below shows the median household income of the magazine's top city in each U.S. state for a certain year. (Round your answers to the nearest cent.)

(a)

Compute the mean and median (in $) for these household income data.

mean$ _______________

median$ ________________

(c)

Compute the range and standard deviation (in $) for these household income data. (Round your standard deviation to the nearest cent.)

range$ _____________

standard deviation$ ________________

(d)

Compute the first and third quartiles (in $) for these household income data.

Q₁$ ____________________

Q₃$ ____________________

(e)

Are there any outliers in these data?

There  ---Select--- below the lower limit and  ---Select--- above the upper limit.

What does this suggest about the data?

There are no outliers in the data, which is likely why the mean value is the same as the median.

There are no outliers in the data, which is likely why the mean value is greater than the median.    

There are outliers in the data, which is likely why the mean value is less than the median.

There are no outliers in the data, which is likely why the mean value is less than the median.

There are outliers in the data, which is likely why the mean value is greater than the median.

As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.

Year

₵

0

(100,000)

1

20,000

2

25,000

3

32,000

4

35,000

Using the CAPM approach, what is the cost of equity on this project?

[2 marks]

Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt?                        [2 mark]

What will be the weighted average cost of capital (WACC)?    [2 mark]

Using the WACC computed in (c), what will be the NPV of the investment?     `                            [3 marks]

Compute the IRR for the project?                     [3 marks]

What will be your overall advice concerning viability of the project?   

[2 marks]

Mr. Norman and Mr. Foster are both investors looking to buy financial assets. Mr. Norman prefers assets with the lowest prices while Mr. Foster prefers assets on the financial market with higher prices. Each of them currently has GHC 1,000 to invest and needs your assistance to know which asset to buy to suit their preference. The following information provides details of investment options.            

Asset A is a bond with a coupon rate of 10% and pays semi-annual coupons. The par value is GHC 1,000, and the bond has 5 years to maturity. The yield to maturity is 11%.

Asset B is a stock whose dividend is expected to increase by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. The last dividend was GHC 100 and the required return is 20%.   

Which asset will Mr. Norman and Mr. Foster invest in?        [8 marks]

In the 2020 accounting year, investors made a number observations in terms of certain decisions some corporations were taking:

(i) The board of directors of some manufacturing and services companies decided to pay stock dividends instead of cash dividends;

(ii) On the other hand, the board of directors of majority of companies within the ICT industry decided to pay special cash dividends;

(iii) It was also observed that some the management of some companies had decided to repurchase shares while others were engaging in stock splits.

What could be the reason for these three decisions and choice of dividend payments by the boards of these companies and what will be the effect of such decisions on the outstanding number of shares and the share prices of these companies?       

1. Which one of the following would be an example of a supply-side market failure?

A. Your business wants to attract repeat customers by putting on a customer-appreciation picnic at a public park, but you decide not to because you couldn't prevent noncustomers from consuming the food and entertainment you provided. B. Everyone rushes to the local retail outlet at midnight on the day of the release of a new video game console, and the store runs out before everyone is able to buy one. C. A gas station is slowly leaking diesel fuel from its underground tanks, but the state uses taxpayer money to clean up the pollution rather than requiring the business to pay. D. A gas station is slowly leaking diesel fuel from its underground tanks, and after the leak is discovered, the business immediately cleans up the pollution at its own expense.

2.The law of increasing opportunity costs states that

A. if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate. B. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so. C. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D. the sum of the costs of producing a particular good can't rise above the current market price of that good.

3.Why is regulatory capture a potential government failure?

A. When regulators get too close to the industry they're meant to manage, they may begin to create rules and laws that benefit the industry over the public. B. Laissez-faire economics dictates there should be no government intervention in the markets at all. C. It prevents the government from supplying important public goods. D. The right to coerce is powerful and prone to abuse.

4 .Jacinta, Juan, and Julian have all decided to start a business together. They'll pool their resources to get it started, they'll share any profits or losses from the business equally, and each of them will be personally responsible for any debts or liabilities from the business. What type of business should they form?

A. Corporation B. Sole proprietorship C. Capital accumulation D. Partnership

5.Imagine that the mayor of your town receives most of his reelection funding from cattle industry clients. As soon as he is reelected to office, he passes a law allowing cattle to be driven through the downtown area. The law is very unpopular, and it could be considered a result of _______ on behalf of the cattle industry clients. A. collective-action problems B. political corruption C. Pigovian taxes D. rent-seeking behavior