UFE CANDIDATE NUMBER:

THE INSTITUTES OF CHARTERED ACCOUNTANTS

OF CANADA
III
2015 Uniform Evaluation
PAPER III Time: 4 hours

NOTES TO CANDIDATES:

(1) Simulations that require knowledge of the Income Tax Act, the Income Tax Application Rules 1971,
and the Income Tax Regulations are based on the laws enacted at December 31, 2013, or in
accordance with the provisions proposed at December 31, 2013.

Provincial statutes, including those related to municipal matters, are not examinable.

(2) To help you budget your time during the evaluation, an estimate of the number of minutes required
for each simulation is shown at the beginning of the simulation.

(3) Tables of present values, certain capital cost allowance rates, and selected tax information are
provided at the end of the evaluation paper as quick reference tools. These tables may be used in
answering any simulation on the paper.

(4) Answers or parts of answers to simulations will not be evaluated if they are recorded on anything
other than the USB key or the writing paper provided. Rough notes will not be evaluated. You are
asked to dispose of them rather than submit them with your response.

**********

The Uniform Evaluation (UFE) is developed and delivered on behalf of the legacy Institutes of Chartered Accountants
by Chartered Professional Accountants of Canada (CPA Canada).

 2015
Chartered Professional Accountants of Canada
277 Wellington Street West, Toronto, Ontario, Canada M5V 3H2
Printed In Canada

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SIMULATION 1 (75 minutes)

You, CA, work for Leduc Chartered Accountants, a public accounting firm. Last week, at the suggestion
of the partner, you presented a seminar entitled, “Do You Know What’s in Your Will?” The seminar
addressed how poorly written wills can result in significant tax liability on death. You also addressed
other issues individuals do not always consider, such as whom the best executor is, whether assets are
going to the proper individuals, and what happens if the spouse dies first.

Today, March 15, 2015, Michel and Aline meet with you. They have two reasons for coming to see you.
First, they are considering the purchase of a rental property and would appreciate a review of the
information they have gathered to determine if the investment is a good idea (Exhibit I). They are
considering renting it for 10 years and then either moving in or selling it. In the meantime, they would
like to earn an 8% rate of return on their investment. Second, they attended your seminar, and it raised
questions. Because Michel is 12 years older than Aline, they worry about what might happen if he were to
pass away first. Further notes from the meeting are in Exhibit II. They also provide you with a copy of
Michel’s will (Exhibit III) and a summary of his current assets and other important information that you
had suggested clients bring when meeting with an advisor (Exhibit IV).

Following your meeting, the partner came up to you and said, “I hear our firm has a new client. When I
am reviewing a client’s will, I approach it by first addressing what the tax liability is if the individual
passes away today, using their will as presented to me, since clients need to know their tax liability. I
usually start with an assumed tax rate of 45%. Second, I look for things in the will that could be changed
to be more advantageous from a tax perspective, and let them know. Also, I look for unanticipated
consequences that could result from the design of their will. I look forward to reviewing your work.”

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SIMULATION 1 (continued)

EXHIBIT I

DETAILS OF RENTAL PROPERTY

Excerpts from the real estate information sheet:

 Prime piece of property in Charlevoix, Quebec, overlooking the St. Lawrence River.

 Purchase price is $440,000.

 Property contains two rental units:

o Unit A is 950 square feet (one bedroom).
o Unit B is 1,188 square feet (two bedroom, with luxury bathroom and kitchen).

 You have the choice of which appliances to purchase (cost is per unit):
o Stainless steel, $12,000
o White, $6,500

The choice of appliances does not affect the amount of rent that can be charged.

 Additional expenses required to be paid before ownership is transferred:

o Occupancy permit — $2,500
o Legal and other related fees — 6% of purchase price
o Deed transfer tax — $10,000

 The area has seen a significant increase in tourists looking for modern rental properties on the water.
These properties usually rent out 365 days a year because of high demand. Rent in the region is based
on the following:
o Units up to1,100 square feet rent for $4.50/square foot per month.
o Units over 1,100 square feet rent for $7.50/square foot per month.

 Because the property is new, expected operating costs are low. Property costs per year are estimated as
follows:
o Insurance — $6,000
o Property tax — $5,000
o Maintenance — $1,000
o Utilities — $10,500

Additional comment from Michel and Aline:

 We will put $100,000 down on the purchase from our cash savings, and we will finance the remainder
with our line of credit, which has an interest rate of 4%.

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SIMULATION 1 (continued)

EXHIBIT II

NOTES FROM MEETING WITH MICHEL & ALINE

Michel and Aline tell you that they prepared a will on their own a few years ago using
www.willsforless.com. They did not know much about preparing a will, but they found the website easy
to navigate because they could just select various options from available drop-down menus.

Michel and Aline have two children, Robert and Diane. Diane is 14 years old. Robert, an architect, is 30
and lives in Vancouver, B.C. He is married and has no children. Robert and Diane are not close, since
Robert moved out of the house before Diane was in preschool and he hardly ever comes home.

Michel has been working at the same job for the last 38 years. Aline has stayed at home to raise the
children.

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SIMULATION 1 (continued)

EXHIBIT III

MICHEL’S WILL

LAST WILL AND TESTAMENT

OF
MICHEL CHENIER

1. I am MICHEL CHENIER of Quebec, Quebec, Canada. This is my will. I revoke all previous wills.

2. I am married to ALINE GIRARD. At the date of this will our children comprise “ROBERT
GIRARD-CHENIER” (son); and “DIANE GIRARD-CHENIER” (daughter).

3. I appoint my children, ROBERT and DIANE, to act as joint executors of my will. They must
decide equally on all matters affecting my estate.

4. I give all my property, real and personal, to my executors to act upon my wishes as follows:

a. The house I own, in which Aline, my wife, and I live, I leave to my son, Robert.

b. The cottage I own, which my wife and I enjoy together, I leave to my sister, Amelie.

c. Any funds that I hold in registered retirement savings plans and the tax-free savings account I
leave to my son, Robert.

d. Any funds that I hold in non-registered investments I leave to my daughter, Diane.

e. Any funds that I hold in a bank account I leave to my wife, Aline.

f. Any artwork that I own I leave to my sister, Amelie.

g. Any jewelry that I own I leave to my son, Robert.

5. I authorize the power upon my executors, at their discretion, to sell any remaining assets, either
through public or private sale, to cover any personal or estate tax liabilities, or other debts that may
arise as a result of my death before the distribution of any assets.

6. If any executor of this will should live outside the geographic location where I last resided before
death, that executor shall be entitled to receive reimbursement for their travel expenses in whatever
amount they deem fit.

7. In Witness whereof, I have to this my Last Will and Testament, subscribed my name this 13th day
of August, 2010.

Michel Chenier
WITNESS MICHEL CHENIER

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SIMULATION 1 (continued)

EXHIBIT IV

MICHEL’S ASSETS

Fair Market
Cost Value
House $ 75,000 $ 250,000
Cottage $ ? $ 245,000
Registered retirement savings plans $ 170,000 $ 195,000
Non-registered investments $ 28,000 $ 55,000
Tax-free savings account $ 18,000 $ 20,000
Artwork $ 500 $ 10,500
Jewelry $ 25,000 $ 20,000
Cash (bank account) $ 190,000 $ 190,000

Michel declared an election in 1994 to use his remaining capital gains exemption available on a piece of
property he owned, which he subsequently sold in 1999.

Notes:

The house was purchased by Michel in 1972.

The cottage was a gift from Michel’s father (Marc) to Michel in 1982. Marc first acquired the cottage in
1944 from his wife’s parents. At the time the cottage had a fair value of $2,000. Marc significantly
renovated the cottage over the years, and when he gave the cottage to Michel, he estimated its value had
increased to $95,000. Michel and Aline renovated the cottage in 1985, and estimate they spent $45,000.

The registered retirement savings plans are in Michel’s name only, and he is the only contributor to the
plans.

The non-registered investments are stocks that Michel has invested in. They are all Canadian investments,
trading on Canadian stock exchanges. They are as follows:
Fair Market
Cost Value
SoftTravel Canada Inc. $ 3,000 $ 6,000
Hurbana Corporation $ 5,000 $ 8,000
SnowBirds Real Estate Inc. $ 20,000 $ 41,000

$ 28,000 $ 55,000

Michel receives about $2,500 of dividend income per year.

Several years ago, Michel put a significant amount of money into a stock and incurred a capital loss of
$20,000. Since then, he has owned only the above assets, and has reported no other capital gains or losses.

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SIMULATION 1 (continued)

EXHIBIT IV (continued)

MICHEL’S ASSETS

The artwork is a painting by a friend, a famous artist. It was purchased two years ago.

The jewelry is the three-carat pink diamond wedding ring Michel inherited from his deceased mother. The
ring had a fair market value of $25,000 at the time that Michel’s mother passed away. However, the pink
diamond was damaged last year, so its value declined.

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SIMULATION 2 (85 minutes)

Runners Unlimited of New Brunswick (RUN) is a not-for-profit organization created to organize running
races in the Moncton area. Last year was RUN’s first year of operations and its first time organizing a big
annual race. The Healthy Lifestyles Race was held in October and was a huge success. Approximately
2,000 runners participated in the 5-kilometre race, and 300 in the marathon, a 42.2-kilometre course. The
5-kilometre course remained open for one hour and the 42.2-kilometre course remained opened for six
hours. This gave all the runners a chance to complete the race, while keeping the duration of the road
closures to a minimum.

Today is January 14, 2015. Last week, you, CA, joined RUN’s board of directors as treasurer. Yesterday,
you met with Rik Smistad, the part-time executive director of RUN, to discuss the organization’s
operations.

Rik said, “I’m really happy to have someone on the board with financial expertise. We are preparing for
the second annual Healthy Lifestyles Race. I’ll send you some background information on the event
(Exhibit I) and the steps I’ve taken to make this year’s event even better (Exhibit II). You’ll see we are
trying to cut costs a bit, since there were complaints last year from the 5-kilometre runners that the fee of
$70 per person was too high. To keep it simple, we charge the same fee to all runners, whether they’re
running the 5-kilometre race or the marathon, and the fee is solely intended to help us break even. Here is
my calculation of the cost per runner, which supports the $70 fee (Exhibit III).

“The board has recently approved my plan to get the marathon portion of the event certified for 2015 as a
time qualifier for premier marathons, such as the Boston Marathon. I expect certification status will cause
our marathon registration numbers to double! Even the 5-kilometre registration should increase by 10%,
since spouses and friends of the marathon runners often sign up for a 5-kilometre race.

“The Association of International Marathons and Road Races (the Association) provides standards a
course has to meet in order to be certified (Exhibit IV). The Association will be sending a representative
on race day to verify that the criteria have been met. The board doesn’t want to risk not qualifying, so
they have requested that we hire an accounting firm to provide a report that the criteria have been met.
We don’t want any of the runners complaining after the race that this race wasn’t considered an official
time qualifier for premier marathons.

“The chair has signed an engagement letter for an accounting firm to perform specified audit procedures
provided by us and report their findings. Can you please design procedures, both ones that can be
performed prior to race day and ones that can be performed on race day?”

When you asked Rik if there was anything else he needed help with, he replied, “I just received a $90,000
grant from the city of Moncton to be used towards capital purchases only. The city really likes that we
promote local businesses in addition to promoting health. A condition of the grant is that we provide the
city with financial statements compliant with accounting standards for not-for-profit organizations for the
year ending December 31, 2014. Can you tell me how to account for the various transactions that have
occurred during the year?”

You replied, “No problem. I’ll set up a time to meet with you and the board chair once I’m done looking
at all this.”

(CONTINUED ON PAGE 9)
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SIMULATION 2 (continued)

EXHIBIT I

BACKGROUND INFORMATION ON THE HEALTHY LIFESTYLES RACE

Race Expo

For the four days prior to the race, we organize a large race expo at the Coliseum (the city provides the
space free of charge). Close to 50 volunteers help us on each of those days. Runners pick up their race kits
at that time. Each kit includes a race bib with the runner’s participant number, a time chip to track the
runner’s time (to be tied to the runner’s shoelaces), a race t-shirt, and discount coupons for local
businesses.

The expo also features vendors selling running-related items. This is an opportunity for these businesses
to access a large number of runners. Last year, we charged each vendor a flat fee of $300 to set up a table
for all four days, which is standard for expos of this type and size.

Race Day

The 5-kilometre and marathon races each have their own course, but they end at the same finish line. The
day before the race, city-provided bleachers are erected near the finish line. For the 5-kilometre race, we
set up portable toilets and one water station at the 3-kilometre mark. For the marathon, we set up water
stations and portable toilets every 5 kilometres, for a total of eight stations.

Road closures are done approximately two hours before the start of the race to minimize the disruption of
traffic. We provide the road blockage barriers, but the city helps us set them up. Police are required to
maintain security and ensure road closures are adhered to. They have charged $5,000 for other
5-kilometre races in the city in past years. They charged us $15,000 last year because our race contains
both a 5-kilometre course and a marathon course.

Registered paramedics are also required to be onsite during the race. Last year we hired 12 registered
paramedics at a rate of $30 per hour for the duration of the race.

On race day, volunteers staff the water stations, direct runners, and answer questions. A volunteer also
acts as the “lead bicycle,” who ensures the leaders of the race follow the correct route. There is also an
“end bicycle” behind the last runner to ensure that no runners are left on the course.

When a runner crosses the starting line, a chip-reader machine automatically reads the time chip on his or
her shoe to determine the runner’s start time. It reads the chip again when the runner’s shoe crosses the
finish line. We rent the chip-reader machines from Runner Stats Inc. (RSI) and also hire them to record
runners’ times and post them on their website.

After crossing the finish line, runners are provided with free fruit, bottles of water, and protein bars to
help them replenish their energy. Each runner also gets a participation medal for finishing the race.

(CONTINUED ON PAGE 10)

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SIMULATION 2 (continued)

EXHIBIT II

RIK’S PLANS FOR THE SECOND ANNUAL

HEALTHY LIFESTYLES RACE

Storage

Last year we purchased a few big items, such as large signs for the start and finish lines, road barriers, and
tables for the water stations. We stored these at the office, but I could barely move, so I’ve rented a small
space to store them in. I wanted a three-year lease, since these things will only last about that long before
we have to replace them, but the landlord wanted five years, so he gave me the first six months free as a
compromise.

Finish-Line Items

Instead of purchasing fruit, water, and protein bars to give away at the finish line, I plan on providing soft
drinks and chocolate bars this year. I got a distributor to provide these items for free, and I know the
runners will appreciate the sugar rush after the race, so it’s a win-win situation!

Cash Sponsors

We did not have any cash sponsors last year (all sponsors donated items, not cash). I am working on a
plan that will attract corporate cash donations. For each $2,000 a company donates, I plan on installing a
large sign advertising that company along the course. That way, they will have a runner’s undivided
attention for at least a few seconds. If a company donates $4,000, it gets two signs at different points on
the course, and so on. I think I can get two businesses to sign up for one sign each this year. It’s brilliant
because I think it will cost only $100 to make each sign.

New Donors

A few companies have approached me about donating items and volunteering hours to the event. I’m
happy because word is really getting around that this is a good event to support.

 Farbro Potato Chips — The company is looking for an activity for its employees to participate in on its
company volunteer day, and is excited about being associated with something healthy for once. Farbro
wants its employees to wear its company t-shirts and will provide the 10 volunteers it takes to staff one
water station for four hours.
 Mike’s Athletic Wear — The company wants to donate the t-shirts included in the race kit. We paid
$10 per t-shirt last year because we had them made locally. Mike is willing to donate them because he
thinks it will be cheap advertising for his business since he keeps his costs low by not sourcing his
shirts locally.

(CONTINUED ON PAGE 11)

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SIMULATION 2 (continued)

EXHIBIT II (continued)

RIK’S PLANS FOR THE SECOND ANNUAL

HEALTHY LIFESTYLES RACE

Expo Businesses

In order to get more businesses to participate in the expo, this year I am offering two free marathon
entries for the following year (2016) to each business that signs up for the expo. I expect the number of
businesses participating will increase from 25 to 35 as a result.

City Grant

I used the grant funds to purchase chip-reader machines from RSI for the start and finish lines so that we
wouldn’t have to continue renting them. The machines cost a total of $90,000 but will save us money,
since they last about 10 years. We will still need to hire RSI to track and post the time data.

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SIMULATION 2 (continued)

EXHIBIT III

COST-PER-RUNNER CALCULATION

2014 Race
(Actuals)
Race kit:
- Bags ($0.10 per bag) $ 230
- T-shirts 23,000
- Race bibs (donated, cost would be $1 per bib) 2,300
- Time chips ($1 per chip) 2,300

Race equipment:
- Chip-reader machine rental 21,000
- Start/finish line stands and signs 15,000
- Tables for 9 water stations 8,000
- Road barriers 23,500

Other:
- Medals for participants ($2 each) 4,600
- Paper cups for water stations (Note 1) 440
- Portable toilets (5 per station, $200 each to rent) 9,000
- Police fee for security and road blockage 15,000
- Paramedics (12 paramedics @ $30/hr for 6 hrs) 2,160
- Food and drinks at finish line ($3/runner) 6,900

Admin:
- Executive director salary (part-time) 20,000
- Rent for current office 6,000
- Rent for new storage space –
- Fees for website hosting and tracking and posting of time data 6,630
166,060
Number of runners 2,300
Cost per runner $ 72.20

Note:

1. Cost is $0.10 per cup. Runners usually use one cup per water station.

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SIMULATION 2 (continued)

EXHIBIT IV

ASSOCIATION OF INTERNATIONAL MARATHONS

AND ROAD RACES STANDARDS

The Association requires the following standards be met in order for the course to be certified:

 Distance must be 42.2 kilometres from start line to finish line, taking the shortest path through turns.
 The start and finish points of a course, measured along a theoretical straight line between them, shall
not be farther apart than 50% of the race distance.
 All traffic must be closed off from the course at all times during the race.
 Timing of runners must be tracked electronically.
 One registered paramedic must be present on the course for every 200 participants for the duration of
the event.
 An emergency plan for the race must exist. It must lay out procedures to be followed in the event of
security breaches or natural disasters, and must include firefighters and police on standby.

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SIMULATION 3 (80 minutes)

It’s October 10, 2014, and you, CA, work as the controller for a group of companies owned by Tyler
Wallace. Tyler’s Travelling Circus Company (TTC) is the newest addition to the group. TTC is an
outdoor circus that travels across Canada from mid-spring to mid-fall. TTC uses large trucks to pull
trailers that contain the equipment and provide housing for its employees. The circus has game booths,
concession stands, and a big-top tent where the acrobats and other performers present the show. Tyler’s
companies have a reputation for valuing and compensating their employees well. Tyler’s goal is to build
TTC’s reputation to match that of his other companies so that it can attract and retain world-renowned
performers.

Dave Warren is the circus manager. Dave’s brother, Ryan, travels with the circus and has been doing the
bookkeeping because he knows the accounting program a little. TTC made it to 24 cities in the year, and
it opened for four days in each city. Tyler explained that he agreed to pay Dave a bonus of $50,000 on top
of his regular salary if Dave managed to keep pre-tax expenses under $1.5 million. It did not seem fair to
Tyler to base the bonus on revenue or profits since Dave’s job has more to do with managing the circus
acts, staffing, travel, and equipment than with ticket sales.

TTC just finished its first year end. August 31 was chosen as the year-end date to match Tyler’s other
companies. Tyler provides you with TTC’s draft financial statements (Exhibit I). Tyler commented that
he is satisfied with TTC’s first-year results. He needs the financial statements to be prepared in
accordance with accounting standards for private enterprises (ASPE) since it’s a specific requirement
under the bank financing. Your first task in this respect is to report to Tyler on whether the accounting
meets ASPE requirements.

Tyler explains that the current processes are manual since TTC is just starting out, but that he wants to
automate as many of the controls as possible because, based on his other businesses, he has found
automation to be effective. He would like your assessment of where controls are lacking in the current
manual processes, and your recommendations on how to improve TTC’s controls with automation.

TTC was in Vancouver in mid-September. You visited the Vancouver performance and noted your
observations (Exhibit II). You then met with Ryan and obtained additional information (Exhibit III).
While you were talking with Ryan, an employee burst in and said one of the trailers had been accidentally
set on fire by the fire eater. By the time you both went to see, the fire had been put out, but some
equipment stored in the trailer had been destroyed.

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SIMULATION 3 (continued)

EXHIBIT I

DRAFT FINANCIAL STATEMENTS

TYLER’S TRAVELLING CIRCUS COMPANY

BALANCE SHEET
As at August 31, 2014

Assets
Cash $ 118,000
Inventory
Concessions (Note 1) 35,000
Game booth prizes 10,000
Property, plant and equipment (Note 2) 900,000
Intangible asset (Note 3) 100,000

$ 1,163,000
Liabilities
Accounts payable and accruals 110,500
GST/HST payable 56,500
Income taxes payable 55,000
Bank loan payable 720,000
942,000
Shareholder’s equity
Common shares 1,000
Retained earnings 220,000
221,000

$ 1,163,000

Notes:

1. All the concession inventory purchases are posted to inventory, and they are expensed when sold. No
inventory count was performed at year end. Food for the performers and other staff is expensed when
purchased.
2. Property, plant and equipment is amortized on a straight-line basis over the expected useful lives. Two
of the trailers are used for transporting equipment, and the rest provide housing to the performers and
other staff.
Cost Accum. Amort. Total
Tents and equipment $ 300,000 $ 30,000 $ 270,000
Trailers 300,000 20,000 280,000
Trucks 400,000 50,000 350,000

$ 1,000,000 $ 100,000 $ 900,000

3. Intangible asset represents advertising to promote tour dates.

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SIMULATION 3 (continued)

EXHIBIT I (continued)

DRAFT FINANCIAL STATEMENTS

TYLER’S TRAVELLING CIRCUS COMPANY

INCOME STATEMENT
For the year ended August 31, 2014

Revenues (entrance fees, game and concession sales) $ 1,685,000

Expenses:
Amortization 100,000
Automotive (gas, repairs, and maintenance) 89,000
Costumes 21,000
Food and beverages:
Concessions 233,000
Performers and other staff 100,000
Prizes 70,000
General and administrative 7,000
Interest 40,000
Insurance 180,000
Salaries, wages, and benefits 570,000
1,410,000

Net income before taxes 275,000

Less income taxes 55,000

Net income $ 220,000

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SIMULATION 3 (continued)

EXHIBIT II

NOTES FROM CA’S CIRCUS VISIT

1. I go to one of the ticket booths. They only accept cash. When I pay the $20 entrance fee, the employee
takes my money and puts it in a cash box, then hands me an entrance ticket from a pile of pre-printed
tickets. I notice a few disgruntled customers who have only debit and credit cards with them turn
around and leave. The ticket looks like this:

WELCOME TO TYLER’S TRAVELLING CIRCUS!

THANK YOU FOR COMING

GOOD FOR 1 ADMISSION

2. An employee at the entrance gate asks to see my ticket. I show her; she nods and steps aside to let me
through. I put the ticket in my pocket.

3. I see a cage of jaguars. It surprises me to see them because I didn’t think TTC had any animal exhibits.
Then I notice a huge poster beside the cage:

SEE THE JAGUARS YEAR-ROUND AT THE GREATER VANCOUVER ZOO!

The employee tending the cage explains that in cities that have their own zoos, Dave has arranged for
TTC to borrow an animal exhibit from the zoo in exchange for advertising. The employee thinks the
idea is brilliant since it would be expensive to rent these animals — about $2,000 per day. Dave has
made this arrangement in six cities. The employee says that Dave intends to expand the circus next
year to include a permanent presence of circus animals.

He advises me to stand back from the cage, since in Toronto one of the tigers borrowed from the
Toronto Zoo bit a customer. Apparently, the customer has told Dave that he has incurred $5,000 of
medical costs to date and that he thinks morally TTC owes him and should pay for these costs, as well
as all future costs he anticipates incurring. “I hope that Dave adjusted the insurance policy for the
presence of animals. Maybe the Toronto Zoo is responsible and not TTC, since it was their animal.
Who knows?”

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SIMULATION 3 (continued)

EXHIBIT II (continued)

NOTES FROM CA’S CIRCUS VISIT

4. I play a couple of games and then get a snack. I buy a burger and fries and watch the vendor place my
money in a cash box and mark my purchase on a summary sheet beside the cash box. I then watch him
throw several sandwiches in the garbage. I ask why they are being thrown out, and he explains that
Tyler has a strict policy of serving food prepared fresh daily and that they were yesterday’s
sandwiches. He says it is a real shame. His guess is that TTC threw away at least $10,000 of food over
the past season, but it is only a guess because no tracking is done.

5. I introduce myself to one of the truck drivers and ask how the trucks are handling the heavy driving
load. He laughs and says that they would probably be doing a lot better if they were getting the
servicing they require. He calls Dave a cheapskate, but then admits that Dave at least arranges the
minimum level of servicing so that the trucks are safe on the road, but he doubts the trucks will last as
long as they should. From his experience, this kind of treatment reduces the life of a truck by two to
three years.

6. I dine with some of the acrobats. The trapeze artist complains that even though they get room and
board, the trailers are crowded, and dinner that night is macaroni and cheese, again. Apparently, lunch
lately has been peanut butter and jelly sandwiches and dinner tends to be pasta — not exactly the fuel
their hard-working bodies need.

7. During dinner, one of the clowns mends a seam on her costume while she explains that Dave got a
good deal on the costumes. Dave provides all performers with only one costume per season, so this is
her fifth repair job. She is thankful that the visit to Victoria, which was scheduled for late August, was
cancelled, because her costume would not have lasted until now otherwise. Dave told her he decided
against going to Victoria because it was too expensive to take the ferry to the island and back. She was
surprised to hear this since she had heard that attendance in Victoria is usually good.

(CONTINUED ON PAGE 19)

2015 Uniform Evaluation Paper III Page 19
III
SIMULATION 3 (continued)

EXHIBIT III

DISCUSSION WITH BOOKKEEPER

Ryan seemed genuinely thrilled that he finally has you as a resource, because he is still learning the
bookkeeping. He admitted to often relying on Dave for help. He joked that he did not even know what an
intangible asset was, and without Dave’s guidance he would not have known how to account for the
advertising contracts.

Dave is the only one besides Ryan who knows the file path to the accounting software installed on the
office computer. Ryan explained that Dave mainly accesses the accounting records to monitor how things
are going. On the road, the staff has access to the office computer so they can check their email.

Every day, Ryan records the day’s sales and GST/HST based on the cash in the cash boxes once they’re
returned to him from the ticket, concession, and game booths (minus the float, of course). He then finds a
bank where he can make the deposit. Each concession vendor also submits a manual summary sheet of its
daily sales, which he uses to update the inventory and cost-of-sales accounts. He has yet to figure out how
to use the system’s inventory module. Similarly, the game booth staff submit a manual summary sheet of
the prizes given away during the day.

For the final show of the season, Dave bought ten $100 gift cards from a national restaurant chain to
reward the top performers. The cost of the gift cards was included in salaries, wages, and benefits. Ryan is
not sure if he needs to do anything from a payroll perspective.

On the 15th and last days of each month, Ryan does the payroll. He has been remitting to CRA based on
what the system’s payroll module calculates. Thinking ahead to February, he asks for help with the T4
filing because he is not clear on what is considered to be included in employment income. Ryan also
mentioned that he is concerned about the GST/HST account. He isn’t sure when the GST/HST filing is
due and wonders if he has already missed the deadline.

(CONTINUED ON PAGE 20)

 PRESENT VALUE OF $1 RECEIVED AT THE END OF THE PERIOD

Periods
Hence 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

1 0.98 0.97 0.96 0.95 0.94 0.93 0.93 0.92 0.91 0.90 0.89 0.88 0.88 0.87 0.86 0.85 0.85 0.84 0.83
2015 Uniform Evaluation

2 0.96 0.94 0.92 0.91 0.89 0.87 0.86 0.84 0.83 0.81 0.80 0.78 0.77 0.76 0.74 0.73 0.72 0.71 0.69
3 0.94 0.92 0.89 0.86 0.84 0.82 0.79 0.77 0.75 0.73 0.71 0.69 0.67 0.66 0.64 0.62 0.61 0.59 0.58
4 0.92 0.89 0.85 0.82 0.79 0.76 0.74 0.71 0.68 0.66 0.64 0.61 0.59 0.57 0.55 0.53 0.52 0.50 0.48
5 0.91 0.86 0.82 0.78 0.75 0.71 0.68 0.65 0.62 0.59 0.57 0.54 0.52 0.50 0.48 0.46 0.44 0.42 0.40

6 0.89 0.84 0.79 0.75 0.70 0.67 0.63 0.60 0.56 0.53 0.51 0.48 0.46 0.43 0.41 0.39 0.37 0.35 0.33
7 0.87 0.81 0.76 0.71 0.67 0.62 0.58 0.55 0.51 0.48 0.45 0.43 0.40 0.38 0.35 0.33 0.31 0.30 0.28
8 0.85 0.79 0.73 0.68 0.63 0.58 0.54 0.50 0.47 0.43 0.40 0.38 0.35 0.33 0.31 0.28 0.27 0.25 0.23
9 0.84 0.77 0.70 0.64 0.59 0.54 0.50 0.46 0.42 0.39 0.36 0.33 0.31 0.28 0.26 0.24 0.23 0.21 0.19
10 0.82 0.74 0.68 0.61 0.56 0.51 0.46 0.42 0.39 0.35 0.32 0.29 0.27 0.25 0.23 0.21 0.19 0.18 0.16

11 0.80 0.72 0.65 0.58 0.53 0.48 0.43 0.39 0.35 0.32 0.29 0.26 0.24 0.21 0.20 0.18 0.16 0.15 0.13
12 0.79 0.70 0.62 0.56 0.50 0.44 0.40 0.36 0.32 0.29 0.26 0.23 0.21 0.19 0.17 0.15 0.14 0.12 0.11
13 0.77 0.68 0.60 0.53 0.47 0.41 0.37 0.33 0.29 0.26 0.23 0.20 0.18 0.16 0.15 0.13 0.12 0.10 0.09
Paper III

TABLE I

14 0.76 0.66 0.58 0.51 0.44 0.39 0.34 0.30 0.26 0.23 0.20 0.18 0.16 0.14 0.13 0.11 0.10 0.09 0.08
15 0.74 0.64 0.56 0.48 0.42 0.36 0.32 0.27 0.24 0.21 0.18 0.16 0.14 0.12 0.11 0.09 0.08 0.07 0.06

(CONTINUED ON PAGE 21)

16 0.73 0.62 0.53 0.46 0.39 0.34 0.29 0.25 0.22 0.19 0.16 0.14 0.12 0.11 0.09 0.08 0.07 0.06 0.05
17 0.71 0.61 0.51 0.44 0.37 0.32 0.27 0.23 0.20 0.17 0.15 0.13 0.11 0.09 0.08 0.07 0.06 0.05 0.05
18 0.70 0.59 0.49 0.42 0.35 0.30 0.25 0.21 0.18 0.15 0.13 0.11 0.09 0.08 0.07 0.06 0.05 0.04 0.04
19 0.69 0.57 0.47 0.40 0.33 0.28 0.23 0.19 0.16 0.14 0.12 0.10 0.08 0.07 0.06 0.05 0.04 0.04 0.03
20 0.67 0.55 0.46 0.38 0.31 0.26 0.21 0.18 0.15 0.12 0.10 0.09 0.07 0.06 0.05 0.04 0.04 0.03 0.03

21 0.66 0.54 0.44 0.36 0.29 0.24 0.20 0.16 0.14 0.11 0.09 0.08 0.06 0.05 0.04 0.04 0.03 0.03 0.02
22 0.65 0.52 0.42 0.34 0.28 0.23 0.18 0.15 0.12 0.10 0.08 0.07 0.06 0.05 0.04 0.03 0.03 0.02 0.02
23 0.63 0.51 0.41 0.33 0.26 0.21 0.17 0.14 0.11 0.09 0.07 0.06 0.05 0.04 0.03 0.03 0.02 0.02 0.02
24 0.62 0.49 0.39 0.31 0.25 0.20 0.16 0.13 0.10 0.08 0.07 0.05 0.04 0.03 0.03 0.02 0.02 0.02 0.01
25 0.61 0.48 0.38 0.30 0.23 0.18 0.15 0.12 0.09 0.07 0.06 0.05 0.04 0.03 0.02 0.02 0.02 0.01 0.01
Page 20
III
 PRESENT VALUE OF AN ANNUITY OF $1 RECEIVED AT THE END OF EACH PERIOD
No. of
Periods
Received 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

1 0.98 0.97 0.96 0.95 0.94 0.93 0.93 0.92 0.91 0.90 0.89 0.88 0.88 0.87 0.86 0.85 0.85 0.84 0.83
2015 Uniform Evaluation

2 1.94 1.91 1.89 1.86 1.83 1.81 1.78 1.76 1.74 1.71 1.69 1.67 1.65 1.63 1.61 1.59 1.57 1.55 1.53
3 2.88 2.83 2.78 2.72 2.67 2.62 2.58 2.53 2.49 2.44 2.40 2.36 2.32 2.28 2.25 2.21 2.17 2.14 2.11
4 3.81 3.72 3.63 3.55 3.47 3.39 3.31 3.24 3.17 3.10 3.04 2.97 2.91 2.85 2.80 2.74 2.69 2.64 2.59
5 4.71 4.58 4.45 4.33 4.21 4.10 3.99 3.89 3.79 3.70 3.60 3.52 3.43 3.35 3.27 3.20 3.13 3.06 2.99

6 5.60 5.42 5.24 5.08 4.92 4.77 4.62 4.49 4.36 4.23 4.11 4.00 3.89 3.78 3.68 3.59 3.50 3.41 3.33
7 6.47 6.23 6.00 5.79 5.58 5.39 5.21 5.03 4.87 4.71 4.56 4.42 4.29 4.16 4.04 3.92 3.81 3.71 3.60
8 7.33 7.02 6.73 6.46 6.21 5.97 5.75 5.53 5.33 5.15 4.97 4.80 4.64 4.49 4.34 4.21 4.08 3.95 3.84
9 8.16 7.79 7.44 7.11 6.80 6.52 6.25 6.00 5.76 5.54 5.33 5.13 4.95 4.77 4.61 4.45 4.30 4.16 4.03
10 8.98 8.53 8.11 7.72 7.36 7.02 6.71 6.42 6.14 5.89 5.65 5.43 5.22 5.02 4.83 4.66 4.49 4.34 4.19

11 9.79 9.25 8.76 8.31 7.89 7.50 7.14 6.81 6.50 6.21 5.94 5.69 5.45 5.23 5.03 4.84 4.66 4.49 4.33
12 10.58 9.95 9.39 8.86 8.38 7.94 7.54 7.16 6.81 6.49 6.19 5.92 5.66 5.42 5.20 4.99 4.79 4.61 4.44
Paper III

13 11.35 10.63 9.99 9.39 8.85 8.36 7.90 7.49 7.10 6.75 6.42 6.12 5.84 5.58 5.34 5.12 4.91 4.71 4.53
TABLE II

14 12.11 11.30 10.56 9.90 9.29 8.75 8.24 7.79 7.37 6.98 6.63 6.30 6.00 5.72 5.47 5.23 5.01 4.80 4.61
15 12.85 11.94 11.12 10.38 9.71 9.11 8.56 8.06 7.61 7.19 6.81 6.46 6.14 5.85 5.58 5.32 5.09 4.88 4.68

(CONTINUED ON PAGE 22)

16 13.58 12.56 11.65 10.84 10.11 9.45 8.85 8.31 7.82 7.38 6.97 6.60 6.27 5.95 5.67 5.41 5.16 4.94 4.73
17 14.29 13.17 12.17 11.27 10.48 9.76 9.12 8.54 8.02 7.55 7.12 6.73 6.37 6.05 5.75 5.47 5.22 4.99 4.77
18 14.99 13.75 12.66 11.69 10.83 10.06 9.37 8.76 8.20 7.70 7.25 6.84 6.47 6.13 5.82 5.53 5.27 5.03 4.81
19 15.68 14.32 13.13 12.09 11.16 10.34 9.60 8.95 8.36 7.84 7.37 6.94 6.55 6.20 5.88 5.58 5.32 5.07 4.84
20 16.35 14.88 13.59 12.46 11.47 10.59 9.82 9.13 8.51 7.96 7.47 7.02 6.62 6.26 5.93 5.63 5.35 5.10 4.87

21 17.01 15.42 14.03 12.82 11.76 10.84 10.02 9.29 8.65 8.08 7.56 7.10 6.69 6.31 5.97 5.67 5.38 5.13 4.89
22 17.66 15.94 14.45 13.16 12.04 11.06 10.20 9.44 8.77 8.18 7.65 7.17 6.74 6.36 6.01 5.70 5.41 5.15 4.91
23 18.29 16.44 14.86 13.49 12.30 11.27 10.37 9.58 8.88 8.27 7.72 7.23 6.79 6.40 6.04 5.72 5.43 5.17 4.93
24 18.91 16.94 15.25 13.80 12.55 11.47 10.53 9.71 8.99 8.35 7.78 7.28 6.84 6.43 6.07 5.75 5.45 5.18 4.94
25 19.52 17.41 15.62 14.09 12.78 11.65 10.68 9.82 9.08 8.42 7.84 7.33 6.87 6.46 6.10 5.77 5.47 5.20 4.95
Page 21
III
2015 Uniform Evaluation Paper III Page 22
III
TABLE III
A FORMULA FOR CALCULATING THE PRESENT VALUE OF
REDUCTIONS IN TAX PAYABLE DUE TO CAPITAL
COST ALLOWANCE

Marginal Rate of
Investment
Cost
× Rate of
Income Tax
× Capital Cost
Allowance ( × 1+ Rate of Return
2 )
( Rate of
Return
+ Rate of Capital
Cost Allowance ) ( × 1+ Rate of Return
)
MAXIMUM
CAPITAL COST ALLOWANCE RATES
FOR SELECTED CLASSES

Class 1 ..................................................... 4%
Class 8 ..................................................... 20%
Class 10 ................................................... 30%
Class 10.1 ................................................ 30%
Class 12 ................................................... 100%
Class 13 ................................................... Original lease period plus one
renewal period (minimum 5
years and maximum 40 years)
Class 14 ................................................... Length of life of property
Class 17 ................................................... 8%
Class 29.................................................... 50% straight-line
Class 43 ................................................... 30%
Class 44 ................................................... 25%
Class 45 ................................................... 45%
Class 50 ................................................... 55%

SELECTED PRESCRIBED AUTOMOBILE AMOUNTS FOR 2014

Maximum depreciable cost — Class 10.1 $30,000 + GST or HST

Maximum monthly deductible lease cost $800 + GST or HST
Maximum monthly deductible interest cost $300
Operating cost benefit — employee 27¢ per kilometre of personal use
Non-taxable car allowance benefit limits
- first 5,000 kilometres 54¢ per kilometre
- balance 48¢ per kilometre

(CONCLUDED ON PAGE 23)

2015 Uniform Evaluation Paper III Page 23
III
TABLE IV
INDIVIDUAL FEDERAL INCOME TAX RATES

Taxable Income 2014* Tax Rate

$43,953 or less 15%
$43,954 to $87,907 $6,593 + 22% on next $42,707
$87,908 to $136,270 $16,263 + 26% on next $46,992
$136,271 or more $28,837 + 29% on remainder
*
2015 rates increase by an indexing of 1.7%.
SELECTED NON-REFUNDABLE TAX CREDITS
PERMITTED TO INDIVIDUALS
FOR PURPOSES OF COMPUTING INCOME TAX
The 2014 tax credits are 15% of the following amounts:
Basic personal amount $11,138
Spouse or common-law partner amount 11,138
Net income threshold for spouse or common-law partner amount NIL
Amount for children under 18 2,255
Age 65 or over in the year 6,916
Net income threshold for age amount 34,873
Canada employment amount up to $1,127
Disability amount 7,766
Infirm dependants 18 and over 6,589
Net income threshold for infirm dependants 18 and over 6,607
Children’s fitness credit 500
Children’s art credit 500
Basic amount for:
GST credit 34,872
Child tax benefit 43,953

CORPORATE FEDERAL INCOME TAX RATE

The tax payable by a corporation on its taxable income under Part I of the Income Tax Act is 38%
before any additions and/or deductions.

PRESCRIBED INTEREST RATES (base rates)

Year Jan. 1 – Mar. 31 Apr. 1 – June 30 July 1 – Sep. 30 Oct. 1 – Dec. 31
2015 1 1
2014 1 1 1 1
2013 1 1 1 2
2012 1 1 1 1
2011 1 1 1 1

This is the rate used for taxable benefits for employees and shareholders, low-interest loans, and other
related-party transactions. The rate is 4 percentage points higher for late or deficient income tax
payments and unremitted withholdings. The rate is 2 percentage points higher for tax refunds to
taxpayers with the exception of corporations, for which the base rate is used.

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