Submission View

Your quiz has been submitted successfully.

When adjusting the decommissioning provision at the end of the year

for the increase in value due to time, the debit side of the entry
under IFRS would be:

a) A related fixed asset

b) A decommissioning obligation

c) An interest expense

d) A depreciation expense

View Feedback

For a decommissioning provision, the present obligation condition is

met when:

a) An obligating event can be measured.

b) An obligating event occurs.

c) An obligating event has been budgeted for.

d) Regulators are contemplating a change that will require the company to incur future decommissioning co

View Feedback

A decommissioning provision typically requires:

a) No discount rate.
 b) An after-tax discount rate.

c) A pre-tax discount rate.

d) A risk-free discount rate.

View Feedback

For each decommissioning provision, at the end of each reporting

period:

a) The provision is updated for any changes in the current best estimate of future cash flows, with the adjustm
expense in the current year.

b) The interest costs for the year are added to the cost of the related asset.

c) The provision is recalculated using the current required discount rate, and the adjustment impacts both the

d) When cash is paid for the decommissioning costs, the provision is increased by the same amount.

View Feedback

During the year, Guthrie Gasoline Ltd. built a service station in

Moncton, New Brunswick. Current engineering estimates show that
the best estimate of the cost to decommission the service station
after its expected useful life of 20 years is $55,000.
How should Gothry Gasoline Ltd., which follows ASPE, record the
decommissioning costs?

a) Decommissioning costs of $55,000 should be discounted and added to the cost of the service station asset
be recorded as a liability in the current year.

b) Decommissioning costs of $55,000 should be added to the cost of the service station asset and an equal am
recorded as a liability in the current year.

c) Decommissioning costs should be recorded as an asset and an equal decommissioning provision should b
value of the liability is known.
 d) Decommissioning costs of $55,000 should be expensed and an equal decommissioning provision should b

View Feedback

A future income tax liability is an amount of income tax arising from:

a) Deductible temporary differences

b) The current taxes after deducting instalments paid

c) Taxable temporary differences

d) The carryforward of unused income tax deductions

View Feedback

In fiscal 20X5 and 20X6, Bronco Inc.’s tax rate was 38%. Bronco
reports income taxes using the future income tax method under
ASPE.

Included in Bronco’s income was warranty expense of $20,000.

Bronco made warranty payments of $30,000 during 20X6. The
balance in warranty payable at the end of 20X6 was $15,000.

During 20X6, amortization of $30,000 for accounting purposes was

expensed and CCA of $40,000 was claimed. There were no additions
or disposals of capital assets. The net book value (NBV) of capital
assets for the 20X5 year end was $130,000, with a corresponding
undepreciated capital cost (UCC) balance of $80,000.

Bronco does not own any land and has not capitalized any leased
assets.

What is Bronco’s 20X6 future income tax expense or recovery?

a) $3,800 future income tax expense

 b) $7,600 future income tax expense

c) $7,600 recovery of future income taxes

d) $17,100 future income tax expense

View Feedback

On January 1, 20X6, depreciable assets with a book value of

$920,000 and a historical cost of $1,000,000 were recorded on GHI
Inc.’s books. CCA totalling $100,000 had been taken on these assets.

During 20X6, GHI recorded depreciation of $80,000 and CCA of

$20,000. The 20X6 current and future tax rate is 35%. GHI has a
December 31 year end.

For 20X6, the temporary differences arising from GHI’s depreciable

assets would result in which of the following?

a) A decrease to income tax expense of $21,000

b) An increase to income tax expense of $7,000

c) A decrease to income tax expense of $7,000

d) A decrease to income tax expense of $14,000.

View Feedback

You, CPA, are the senior auditor assigned to the Truestar Ltd. audit
file. You are reviewing Truestar’s financial statements and note that
the only items included on Truestar’s balance sheet that have
temporary differences for future income taxes are: intangible assets
relating to deferred development costs of $20,000, a leased asset of
$80,000, and a lease obligation of $69,000. Truestar’s tax rate is 20%
and the company uses the future income tax method to account for
income taxes. At the end of last year, Truestar’s future income tax
liability was $7,000. Calculate Truestar’s future tax expense/recovery
for the current year.

a) $3,000 recovery

b) $6,200 expense

c) $4,800 recovery

d) $800 recovery

View Feedback

Pick Up Ltd. (PUL) holds 18% of the common shares of Vines Inc. (VI).
PUL is able to appoint three members of VI’s 12-member Board of
Directors and is a supplier of raw materials to VI. The remaining 82%
of VI’s common shares are widely held. VI is a private company.
Assuming PUL reports under ASPE, what are the reporting options for
its investment in VI?

a) Equity method

b) Equity method or cost

c) Equity method, cost, or consolidation

d) Fair value through profit or loss (FVTPL) or cost

View Feedback

Bedford Inc. (BI) acquired 25% of the shares of Red Inc. (RI) in the
current fiscal year for $150,000 with no fair value differentials. It was
determined that BI’s investment in RI should be accounted for using
the equity method.
 During the year:

 RI paid $100,000 in dividends.

 RI reported net income of $500,000, which included $20,000 (in
profits) that resulted from sales of inventory to BI.

BI has yet to process the inventory it purchased from RI. This

inventory will be processed next year and the resulting product will
be sold to one of BI’s customers.
What should be reported as “investment in RI” on BI’s current-year
statement of financial position? Ignore any potential tax
consequences.

a) $150,000

b) $170,000

c) $245,000

d) $250,000

View Feedback

Company A has significant influence over Company B. Under IFRS,

which one of the following factors could cause Company A’s
investment account to decrease?

a) Purchase price

b) Goodwill

c) Net income

d) Unrealized profit in inventory

 View Feedback

In 20X6, Vines Inc. (Vines) purchased 40% of the common shares of

Bottles Inc. (Bottles). At the time, there were no fair value
differentials.

In 20X7, Vines sold inventory to Bottles for $80,000. $25,000 of this

remained at year end. This inventory was sold by Bottles in 20X8.
Also during 20X8, Vines sold additional inventory to Bottles for
$60,000 of which $30,000 remains in inventory. Vines earns a gross
profit of 30% on sales of its inventory. Both companies pay income
taxes at 25%.
During 20X8, Bottles earned net income of $200,000.

What is the amount of equity income reported by Vines in 20X8?

a) $79,400

b) $79,550

c) $80,000

d) $80,450

View Feedback

Accounting net income (determined in accordance with generally

accepted accounting principles) of Extec Inc. (Extec) is $456,000.
Additional information is as follows:

 Extec’s amortization expense for the year was $30,000.

Maximum capital cost allowance (CCA) for the year was $25,400.
 Extec estimated and deducted $7,500 in warranty costs during
the year. Actual warranty costs paid for providing warranties during
the year were $4,600.
 Extec expensed $3,800 in charitable donations during the year.
Based on the information above, determine Extec’s net income for
tax purposes for the year.

a) $458,100

b) $461,500

c) $463,500

d) $467,300

View Feedback

Which of the following is an adjustment on the Schedule 1 for

corporate income taxes?

a) A general reserve for inventory obsolescence of $13,000.

b) $1,100 for the cost of uniforms with the company logo provided to the local peewee soccer team.

c) An accounts receivable allowance of $4,600 for three accounts determined by specifically identifying acc

d) A $50,000 contribution to the company-sponsored defined contribution pension plan (equal to the pension

View Feedback

You, CPA, are the controller for an electronics retailer, Future Now Ltd.
(Future). You have been asked to prepare a Schedule 1 reconciliation
of accounting net income to net income for tax purposes for the
current year ended December 31. Which one of the following items
will be deducted on the Schedule 1 reconciliation?

a) During the year, Future expensed estimated warranty costs of $39,000.

b) Future deducted $3,800 in interest on its operating line of credit.

 c) Future recorded $2,500 of interest charged on late income tax instalments.

d) Future recorded $8,900 of premium amortization on the company’s bonds payable.

View Feedback

ABC Co. recently sold its largest building for $1,123,453. The building
had a cost of $877,543 and an undepreciated capital cost (UCC) of
$701,456. What are the tax implications of this sale?

a) Terminal loss of $176,087

b) Recapture of $176,087 and capital gain of $245,910

c) Recapture of $176,087

d) Capital gain of $421,997

View Feedback

Cameron Co.’s Class 8 undepreciated capital cost (UCC) balance on

January 1, Year 1, was $122,000. During Year 1, it acquired additional
Class 8 assets at a cost of $43,700 and sold Class 8 assets for
$12,500 (less than original cost). What is the maximum capital cost
allowance (CCA) that may be claimed in Year 1?

a) $24,440

b) $27,520

c) $28,770
 d) $30,640

View Feedback

During the current year, a capital asset that had originally cost
$20,000 was sold for $12,000. The opening Class 8 undepreciated
capital cost (UCC) balance was $15,000. Assuming there are no
assets left in this class, what are the tax consequences?

a) $3,000 terminal loss

b) $3,000 terminal loss and $5,000 capital loss

c) $3,000 recapture

d) Capital cost allowance (CCA) of $600

View Feedback

In 20X7, Telcom Ltd. replaced some of its computers with new

computers that were faster and cheaper. The new computers cost
$9,000, and old computers that had been purchased in 20X2 were
sold for $10,000 ($20,000 original cost). Telcom’s Class 50 opening
balance was $17,000. What is the maximum capital cost allowance
(CCA) that may be claimed on this class for 20X2?

a) $3,300

b) $4,400

c) $8,800

d) $9,075
 View Feedback

Assume the following for Mark’s Warehouse Ltd. (Mark’s):

Net income for tax purposes $530,200

Less
Net capital losses of other years (5,000)
Charitable donations (50,000)
Taxable income $475,200

During the year, Mark’s sold some shares in a public company for
$100,000. The shares cost $60,000. This was the only sale of assets
in the year. Mark’s did not earn any interest or dividend income
during the year.

What is the correct amount of active business income (ABI) to be

used for determining one of the lesser of amounts for the small
business deduction for Mark’s for the year?

a) $460,200

b) $510,200

c) $515,200

d) $475,200

View Feedback

You have been provided with the following information for Parthenon
Ltd. for its current taxation year:

Net income for tax purposes $510,200

Taxable capital gains realized 25,000
Foreign dividends received 8,600
Canadian dividends received 10,900
Net capital loss carryover used in the year 4,600
Non-capital loss carryover used in the year 10,200
Foreign business income earned 28,700
What is the correct amount of active business income (ABI) to be
used as one of the lesser of amounts for determining the small
business deduction for Parthenon for the year?

a) $465,700

b) $452,500

c) $426,800

d) $437,000

View Feedback

Dunitall Inc. is a Canadian-controlled private corporation with a

December 31 year end. The following amounts have been correctly
determined for the current year for Dunitall:

Active business income (ABI) $550,000

Aggregate investment income (AII) 190,000
Taxable income $740,000
The combined federal and provincial corporate income tax rate on
income eligible for the small business deduction is 15%, while the
combined federal and provincial rate for other ABI is 29%,
incorporating the general rate reduction (GRR). The GRR for 2016 is
13%, and the additional refundable tax (ART) rate is 10 2/3%.

What is the correct amount of income tax legally payable for Dunitall
for the current year?

a) $149,033

b) $164,867

c) $189,567
 d) $182,567

View Feedback

Which of the following statements is true?

a) There are no income-splitting opportunities when a business is run as a sole proprietorship.

b) The basic rules for determining net business income are different for proprietorships and corporations.

c) Individual venturers can make different capital cost allowance (CCA) claims against their share of joint v
cannot make different CCA claims against their net income from the partnership.

d) A capital gains deduction may be claimed against a taxable capital gain that arises on the sale by an indiv

View Feedback

Which of the following statements is FALSE?

a) In both a partnership and a joint venture, property such as equipment is legally owned by the partnership o

b) Partnerships are normally formed to carry on business over a period of time, while joint ventures are gene

c) In a partnership, decisions are normally made over time in agreement with other partners. In a joint ventur
are specified in the joint venture agreement.

d) Net income of a partnership is allocated to individual partners on the basis of the partnership agreement. R
individual venturers on the basis of the joint venture agreement.
View Feedback

25 / 25 - 100 %

25 / 25 - 100 %