Strategy & Governance
Provides strategic direction to the organization and oversight of senior management's activities.
Board of Directors
The City of Scarborough, rated the best city in North America, is in the process of building the most innovative casino known to mankind in the heart of Scarborough Town Center, it is expected millions of people will come to give away their hard-earned money every year. Ehsan, the head of Capital Investment department, has decided to capitalize the construction materials as well as refreshments given to construction workers while they are working hard to build the casino. Although he holds a CPA, he has decided to ask you for your advice on this decision. The city uses IFRS.
Under IAS 16.16 the cost of an item of PPE comprises:
Congratulations! You’ve been hired under Maison de Brion, a company that focuses on building custom homes for clients. You’ve been asked to analyze the behaviour of costs relevant to activity of constructing homes. Identify which of the following costs is fixed, indirect, and a product cost:
Depreciation of carpenter tools remains fixed year to year and is associated with the creation of the (from new to finished) product. However, the depreciation cannot be evaluated granularly to directly allocate to a product, therefore it’s considered an indirect cost.
Is the following statement regarding Materiality True or False?
Determining materiality requires professional judgment, as both quantitative and qualitative factors need to be taken into consideration. Several steps are required to determine materiality.
Answer: True
Albertine Corporation, based in Ontario, has a year end date of November 25, 2021. As such, the deadline for which they must file their annual return is ________
May 25, 2022
Corporations have a filing deadline of 6 months after their year end
Financial, Customer, Internal process, and Learning/growth are all components of
Balanced Scorecard
Jamieson Snow, CPA, CFA, MAccFin has given up on his career and has set up shop as an NFT trader, he is heavily invested in NFTs as he believes they will soon replace currencies across the world. In his extensive collection, he holds a set of freshly issued Trudeau’s blackface NFTs for which he paid $40,000. His friends, family, colleagues, and industry experts have told him that amidst the current social climate, the value of his NFTs is around $0.10, or the price of a plastic fork at La Prep. Mr. Snow on the other hand disagrees with this estimate and has the NFT recorded in his inventory at $40,000. Could you, CPA Auditor, shed light on this mystery? Assume IFRS.
Under IAS 2.9, “Inventories shall be measured at the lower of cost and net realisable value.”
Tired of accounting, you’ve decided to take a crack at entrepreneurship! With the rising gas prices, you’ve noticed bikes have been flying off the shelves. Some industry research revealed the following:
Unit Selling Price: $500
Unit Variable Expense: $300
Total Fixed Expenses: $80,000
How many units of bikes would you need to sell to arrive at break-even, i.e., profits = $0?
The formula for break-even expressed in number of units is:
Sales = Variable Expenses + Fixed Expenses + Profits
Letting Q = number of bikes sold, we find break-even by:
$500Q = $300Q + $50,000 + $0
$200Q = $80,000
Q = $80,000/200
Q = 400 bikes
Which of the following statements most accurately describes what Audit Evidence is?
A) Transcripts from meetings with management and other key personnel at the client site.
B) Information used by the auditor in arriving at the conclusions on which the auditor's opinion is based. Includes both information contained in the accounting records underlying the financial statements and information obtained from other sources.
C) Information obtained indirectly from independent outside sources.
D) Third-party information used by internal auditors employed by management in performing various functional requirements.
Answer: B
The practitioner's objective is to design and perform audit procedures in such a way as to enable the practitioner to obtain sufficient appropriate audit evidence in order to draw reasonable conclusions on which to base the practitioner's opinion.
Gayathri arrived in Canada from the US on February 15, 2022 to work full-time at Albertine Corporation where she was given a board and lodge on the company’s campus. On November 25, 2022, Gayathri’s parents and siblings arrived in Canada from the US with all their belongings with the intention to become Canadian citizens in the near future. What is Gayathri’s current residency status for tax purposes, when did she become a resident?
Resident as of February 15, 2022
Resident as she has the intention to stay permanently as she has a full-time job and entire family moved to Canada with the intention of permanently staying; Clean break/Fresh start for Gayathri is February 15, 2022 as it is the date she arrived to Canada
Tax implication: She will be taxed on worldwide income from February 15 to December 31 of 2022 and before February 15, she will only income generated in Canada will be subject to tax
Differentiation
Rita Underwood , having recently completed the MAccFin program, was distraught when she found out that she would only earn $48,000 in her new position as Staff Accountant at a large accounting firm despite having spent much effort in passing the CFE. After much reflection, and especially after finding out a 15-year-old makes millions a year on YouTube, she decided to give up on vouching invoices for 10 hours a day and became determined to start the new and better Amazon. In recent years Rita has been very successful and has recorded $500,000 in profit in 2021. When a customer purchases an item, Rita records 100% of the price of the item as revenue and remits 69% to the seller, her cost of goods sold consist of the shipping and handling expenses she incurs to deliver the items to the customers. Shipping and handling historically represents 5% of selling price. Is there any issue? if so, recalculate profits.
Under IFRS15.B36 “An entity is an agent if the entity's performance obligation is to arrange for the provision of the specified good or service by another party. An entity that is an agent does not control the specified good or service provided by another party before that good or service is transferred to the customer.” As such Rita’s company is an agent in this case.
Further, “When (or as) an entity that is an agent satisfies a performance obligation, the entity recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party.”
Revenue = $155,000
Shipping = 25,000
Profit = $130,000
As a financial analyst, you’ve been approached by the project manager with concerns about profitability of his department. In beginning of the month, he created a static budget estimating 12,000 units will be sold, estimating that a total of $972,000 in contribution margin is earned. However, at month end actual units sold were determined to be 10,000. He’s asked you to quantitatively determine the performance this month.
We apply the sales-volume variance formula here – this formula helps determine the degree to which the organization’s goals are met. The formula for sales-volume variance is:
(Actual Units Sold – Budgeted Units) x Budgeted Contribution Margin per Unit
Therefore, here:
(10,000 – 12,000) x ($972,000/12,000) = $162,000 Unfavourable
Hence, the department had an unfavourable variance this month.
The system of internal control consists of 5 interrelated components, which auditors must assess. 4 are listed below, what’s the missing one?
1. Control Environment
2. _____________________
3. The entity's process to monitor the system of internal control
4. The information system and communication
5. Control activities
Answer: The entity's risk assessment process
CAS 315: Identifying and Assessing the Risks of Material Misstatement defines the system of internal control as "the system designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity's objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations."
Jenny, a Toronto-based sculptor, entered into a contract with Snow Limited to create ice installations across the city, which were to be used as a marketing tactic to increase company sales. Despite having creative liberty as well as the company allowing her to work at her warehouse and use her own tools, Snow Limited restricted the designs to fit a specific theme as well as would force her to pay for the cost of materials spent if sales did not increase by at least 2%. As such, this contract treats Jenny as a ______
Self-Employed or Independent Contractor
The following contract passes all three tests (Economic Reality Test, Integration Test, and Specific Results Test) and would be considered self-employed or an independent contractor
Key performance indicator
Kennedy Yonge Inc., a very successful developer, has recently acquired another developer, EllisDon, the transaction took place on March 1st, 2022, with a purchase price of $2B. As of the date of the transaction, EllisDon had $1.5B in assets, $500M in Liabilities, $1B in Equity and has had Net Income of $350M in Fiscal year 2021. The CFO, being tied grading MAccFin exams, has asked you to prepare the accounting for this transaction and the impact on Kennedy Yonge’s financial statements.
Must Consolidate after.
Alphabet Co. makes products A&B. Product A is a low-volume specialty item and B is a high-volume item. Estimated factory-wide overhead is $800,000, and the number of DL hours for the year is estimated to be 50,000 hours. DL costs are $10/hour. Each product uses 2 DL hours. Compute the traditional cost of each product if Products A & B use $25 and $10 in direct materials, respectively.
As we’ve been asked to determine the product cost under traditional method, the cost of each product is simply DM + DL + MOH.
To find allocation of MOH, we determine the BMOH Rate.
BMOH = Total BMOH/Estimated Cost Driver = $800,000/50,000DLH = $16/hour
Thus, the cost per unit are:
Product A:
DM = $25
DL = 2 hours x $10 = $20
MOH = 2 hours x $16 = $32
Cost = $77
Product B: Same as above, but DM = $10. Total = $62
You have been hired as a Staff Accountant at Daga & Auditors LLP and must perform analytical procedures for various accounts. There are three main types of analytical procedures that a practitioner should perform at a minimum, which three are they?
A) Horizontal, ratio and inquiry analysis
B) Ratio, computational and horizontal analysis
C) Vertical, horizontal and ratio analysis
Answer: C
CAS 520: Analytical Procedures defines analytical procedures as evaluations of financial information through analysis of plausible relationships involving both financial and non-financial data. This can be accomplished through horizontal analysis (trend analysis), vertical analysis (common-size analysis), and ratio analysis.
On November 25, 2021, Albertine Corporation generated a net income as seen on the company’s financial statements of $220,000. In addition, the organization also contributed $30,000 in charitable donations, $10,000 in membership fees at a local golf club for their salespeople, meals and entertainment amounting to $100,000 from the salespeople, CCA of $50,000, depreciation of $60,000, and $20,000 in costs from the company’s annual holiday party. As such, what is Albertine Corporation's 2021 Income from Business (Division B)?
Income From Business (Division B) = $120,000
Net income as per financial Statements ($220,000) + Depreciation ($60,000) + Club Dues ($10,000) + Charitable Donations ($30,000) + Meals and Entertainment (50%*$100,000) - CCA ($50,000) = Income From Business (Division B) $120,000
Note: Christmas Party costs will not be included up to 6 parties in one year
Corporate Social Responsibility
The CIA has reached out to you, CPA, to prevent the world from ending. Indeed, the Russians have said that they would unleash all their nuclear bombs in Canada, US, and Europe, unless the allied countries can provide them with the proper IFRS treatment for a recent transaction. The Russian government has sold the Kremlin to finance the war on drugs, however, to effectively conduct the war, they leased back the Kremlin to the new owner as it is their command center after all! Under the terms of the lease agreement, with an interest rate implicit of 10%, the government must pay $2M at the end of each year for a period of 10 years and has the opportunity to buy back the Kremlin for $20M at the end of the lease term. Independent valuators have estimated the Fair value of the Kremlin at the end of the lease term will be $30M. Unfortunately, no one in the western hemisphere knows lease accounting! The CIA has heard great things about the MAccFin program and has reached out to you, an alumnus, to help save the world; the fate of billions of people is in your hands!
Under IFRS16.23-24, “At the commencement date, a lessee shall measure the right-of-use asset at cost.” The cost of the right-of-use asset shall comprise
Further, IFRS 16.26 states “At the commencement date, a lessee shall measure the lease liability [..] discounted using the interest rate implicit in the lease
In addition, IFRS 16.27 states that included in the lease liability is “the exercise price of a purchase option if the lessee is reasonably certain to exercise that option”
Lease Liability = (PVIFA(10%,10) 6.145 * $2M ) + PV(10%,10) 0.38854 * $20M= $20,060,800
Alpha Company budgets its activities for April based on the following information:
Alpha would project operating income for April in the amount of?
Sales = 900,000 – (900,000*0.02) = 882,000
COGS = 900,000/1.6 = 562,500
Gross Margin = 882,000 – 562,500 = 319,500
Operating Expenses = (100,000 + 50,000) = (150,000)
Operating Income = 319,500 – 150,000 = $169,500
Ehsan Foods Inc. prepares its financial statements in accordance with provisions set out by the national health regulator. The regulator requires Ehsan Foods to provide a report with the highest level of assurance on an annual basis. Determine which type of special engagement/report is the most appropriate under this circumstance.
Answer: A CAS 800 Special Considerations - Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks report is appropriate as Ehsan Food's financial statements are prepared in accordance with the provisions established by a regulator (a special purpose framework). The practitioner responsible for the engagement would evaluate whether the financial statements adequately refer to, or describe, the applicable financial reporting framework. The practitioner would include an Emphasis of Matter paragraph in the report that alerts users that the financial statements were prepared in accordance with a special purpose framework and that the financial statements may not be suitable for another purpose.
For the 2021 fiscal year, Snow Limited, an Ontario-based corporation reported Division B income of $55,000 and dividend income of $5,000 from a taxable Canadian corporation. The company also incurred $10,000 in taxable capital gains, allowable capital losses of $2,000, $5,000 in net capital losses, incurred in 2020, and charitable donations of $20,000. The Division C income of Snow Limited is ______
Division C Income = $38,000
Income from Business (Division B) ($55,000) + Income from Property (Dividend) ($5,000) + Taxable Capital Gains ($10,000) - Allowable Capital Losses ($2,000) - Inter-company Dividends ($5,000) - Charitable Donations ($20,000) - Net Capital Losses ($5,000) = Division C Income $38,000