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    ABC Daycare

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    Tom Chan

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    © All Rights Reserved
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    Mock Common Final Examination Day 3 Page 1 MARKING GUIDE ~ ABC DAY CARE CENTRE ASSESSMENT. TIES Kimiko Hahn, Owner of ABC Day Care Centre (ABC) CPA ABC Proposed Expansion, Tax Questions and Other Operational Matters Indoor Playground Per Exhibit |, ABC must charge $12.29 for children over two years of age and $6.15 for children two years of age and under for the indoor playground to achieve a pre-tax profit of $50,000. This places ABC below the competition's pricing of $12.50 per child, making this a viable and Competitive option for expansion. For Assessment Opportunity #1, the candidate must be ranked in one of the following five categories: Not addressed — The candidate does not address this assessment opportunity. Nominal competence — The candidate does not meet the standard of reaching competence. Reaching competence — The candidate attempts to calculate a price to charge for the proposed indoor playaround, Competent — The candidate calculates a reasonable price to charge for the proposed indoor playground. Competent with distinction - The candidate calculates an accurate price to charge for the proposed indoor playground and concludes whether this expansion plan is viable. © 2018, Densmore Consulting Services Ine. All Rights Reserved Mock Common Final Examination Day 3 Page 2 Rock Climbing Centre ‘There are several risk response alternatives available to ABC with respect to the rock climbing centre: + Risk reduction is the management of risks retained in a way that increases the probability of achieving objectives while reducing the likelinood and consequences of threats, This alternative would involve the use of a preventive control such as the use of one full-time staff member to monitor the rock climbing centre. The net cost of this alternative is calculated as: 9 hours per day x $15 per hour x 360 days per year $48,600 - $17,081 earned from admissions ($12.29 x 75 children x 12 months) = $37,539 + Risk transference transfers the risk to a third party. This alternative would involve purchasing insurance to transfer the risk to the insurance company. The benefit of this alternative is calculated as: $700 per month for insurance x 12 months = $8,400 - $11,061 earned from admissions = ($2,661) + Risk acceptance means that ABC would decide to accept some risks. This alternative ‘would involve self-insuring the rock climbing centre (covering the cost of settling the lawsuits). There is @ probability of at least one injury per year. The possible benefit of this alternative is calculated as: $7,500 cost to settle one injury - $11,061 earned from admissions = ($3,561) = Risk avoidance is conscious strategic choice not to proceed with an activity likely to generate risk. This alternative would involve not going ahead with the rock climbing centre at all. The cost to this alternative is zero as there are no rewards, but no risks either. Therefore, | recommend proceeding with the rock climbing centre by using a risk transference strategy, whereby insurance is purchased to transfer the risk to the insurance company. Although there is a higher possible benefit from the risk acceptance strategy, there is risk that the number of injuries or the amount to settle per injury could be higher than expected. © 2018, Densmore Consulting Services Inc. All Rights Reserved. Mock Common Final Examination. Day3 Page 3 For Assessment Opportunity #2, the candidate must be ranked in one of the following five categories: Not addressed — The candidate does not address this assessment opportunity. ‘Nominal competence — The candidate does not meet the standard of reaching competence. Reaching competence — The candidate attempts to analyze some of the risk response altematives available for the rock climbing centre. Competent ~ The candidate analyzes some of the risk response alternatives available for the Fock climbing centre and concludes on the best course of action. Competent with distinction — The candidate analyzes several of the risk response alternatives. available for the rock climbing centre and concludes on the best course of action. HST Implications ABC is currently not registered for HST because child care services, where the primary purpose is to provide care and supervision to children 14 years of age or under for periods of less than 24 hours per day (.e., not overnight), is an exempt supply. Similarly, ABC would not be entitled to claim any HST paid as input tax credits (ITCs) on property and services acquired to provide these supplies. If the sole purpose of the indoor playground was to provide supervised weekly day camps, this status would not change as these day camps would also be considered an exempt supply. However, the primary purpose of the indoor playground is for non-exempt purposes (ie., tO provide entertainment for children, which is supervised by their parents). Therefore, this service is a taxable supply and is subject to HST. As an HST registrant, ABC would be able to claim ITCs for HST paid on its operating expenses for the playground to the extent the playground is used for taxable purposes. However, any HST paid on operating expenses used for exempt supplies (that is, the day camp), would not be claimable as an ITC. Similarly, HST paid on the purchase of capital property (such as the playground equipment) may be eligible for ITC's depending on the percentage of its use in taxable activities. As long as the day camps make up a small percentage of use (less than 10%), 100% of the ITCs can be claimed. Ifthe percentage is greater than 10%, then the ITCs would have to be pro-rated accordingly © 2018, Densmore Consulting Services Inc. All Rights Reserved, Mock Common Final Examination Day 3 Page 4 The playground will be used for both an exempt supply (day camps) and a taxable supply (entertainment), the costs will need to be tracked to ensure the correct ITCs are claimed. As noted above, if the day camps make up less than 10% of the usage, no tracking is needed. ABC will be required to register for HST because it expects to eam more than $30,000 annually from the indoor playground (Exhibit |). While ABC could wait to register for HST until it exceeds, $30,000 in taxable supplies (including zero-rated supplies) in the previous four quarters, this would not be the most beneficial for ABC because it would be unable to claim the ITCs on the HST paid on the equipment and supplies needed to open the playground. Therefore, ABC should register for HST before beginning to build the indoor playground. [Note: ABC may be able to claim ITCs equal to the basic tax content of the equipment and supplies ABC had on hand for use in its commercial activities at the time it became a registrant. The basic tax content generally means the lesser of the amount of HST that was payable when the property was acquired and the HST that would be calculated on the current fair market value of the equipment and supplies which may be lower than the ITC that could be claimed if ABC was registered at the time of the purchase] ‘ABC also plans to sell snacks and beverages, such as fruit, crackers, chocolate bars, pop and milk. The supply of basic groceries is zero-rated, which means that no HST would be charged to customers. This section includes items such as fruit and milk, which would be considered zero- rated supplies. Crackers (other than graham crackers or crackers with a sweet filling or coating) would also be considered zero-rated, as they do not fall under the label of snack foods. Chocolate bars would be considered taxable, as they are listed as an example under candies, which are taxable supplies. Likewise, pop would also be considered a taxable supply as it is a carbonated beverage. For Assessment Opportunity #3, the candidate must be ranked in one of the following five categories: Not addressed ~ The candidate does not address this assessment opportunity. Nominal competence — The candidate does not meet the standard of reaching competence. Reaching competence ~ The candidate attempts to discuss the HST implications for the new playground facility or the weekly day camps. Competent — The candidate discusses the HST implications for the new playground facility and the weekly day camps. ‘Competent with distinction — The candidate discusses the HST implications for the new playground facility and the weekly day camps in depth. © 2018, Densmore Consulting Services Inc. All Rights Reserved. Mock Common Final Examination Day 3 Page 5 Per Exhibit Il, both Mount Pleasant and Bramalea are operating at a pre-tax profit while Royal Garden is operating at a loss. Overall, ABC is operating at a pre-tax profit of $9,800 ($55,000 + $53,300 - $33,400 - $85,000) once your salary is considered. We should further investigate how to improve the operations at Royal Garden or consider closing this centre, For Assessment Opportunity #4, the candidate must be ranked in one of the following five categories: Not addressed — The candidate does not address this assessment opportunity. Nominal competence ~ The candidate does not meet the standard of reaching competence. Reaching competence ~ The candidate attempts to analyze the pre-tax profitability of the day care locations. Competent ~The candidate analyzes the pre-tax profitability of the day care locations. Competent with distinction — The candidate accurately analyzes the pre-tax profitability of the day care locations. ABC's mission is to provide a safe, inclusive and stimulating early learning environment for toddlers and preschool children that promotes each child's social, emotional, physical and cognitive development. Based on some of the Twitter feedback received, it does not appear that ABC is meeting its mission. (© 2018, Densmore Consulting Services Inc. All Rights Reserved. Mock Common Final Examination Day 3 Page 6 ‘One parent has complained about a dirty and smelly environment. This is not consistent with ABC's mission as they are supposed to be providing a safe environment. If children are getting sick or parents are unhappy with the cleanliness of the location, they will pull their children and ‘ABC will lose its revenue source. ABC could also be shut down if they are not complying with health and safety regulations. | recommend encouraging supervisors to clean up messes as they ‘occur to minimize the dirt and smell. You may also need to increase the frequency of cleaning provided if this continues to be an issue. A child was being teased at day care. ABC's mission stresses an inclusive environment for the children. Allowing teasing does not meet this mission and may result in parents pulling their children out of the day care, resulting in lost revenues. ABC should put in place a staff policy that, details how to deal with issues such as teasing and bullying to prevent allowing these actions to persist. Kimiko should also watch for these types of interactions when she performs her site visits. ABC should also track these issues by child so that they can be reported back to the parents. A parent has complained about the apparent lack of physical activity the children are getting at day care. ABCs mission is to provide an environment that promotes physical development, which would include sufficient active time. Without this, these children are more likely to get into trouble in the classroom, hurt other children or break things. ABC should enforce a policy that includes a sufficient amount of outside active play each day, weather permitting. ABC should ensure that each of its locations has a suitable outdoor play facility for the children. Another parent has complained about the lack of story time. ABC's mission is to promote cognitive development and the lack of structured learning activities, such as story time, is not consistent with that mission. Parents may decide to move to a different day care that offers story time consistently, which means revenues would decrease. ABC should provide a sample daily schedule for each location to follow, including snack times, play times and structured learning times. The schedule can be modified as needed, but would stress the key requirements to include in each day to cover ABC's mission. It should be noted that there could be other activities that are being offered instead of story time that satisfy these requirements, but the complaint does not specify, A parent has noted rude staff behaviour, including shouting commands at the children, This is inconsistent with ABC's mission as it does not provide a safe or inclusive environment, nor one focused on positive eariy learning. The parent has said that his children will be pulled out of the day care as a result, which means revenues will decrease. tis important that staff treat children with respect and model good behaviour. A memo should be sent to all staff to remind them of appropriate ways to address the children and Kimiko should be reviewing each staff's interactions with the children as part of her site visits. Overall, Kimiko should be reviewing the programming and environment at each location on a regular basis to ensure that ABC remains in line with regulations and to maintain the expected high quality standards. This will help ensure that ABC meets its mission. © 2018, Densmore Consulting Services Inc. All Rights Reserved ‘Mock Common Final Examination Day 3 Page 7 For Assessment Opportunity #5, the candidate must be ranked in one of the following five categories: Not addressed — The candidate does not address this assessment opportunity. Nominal competence — The candidate does not meet the standard of reaching competence. Reaching competence — The candidate attempts to analyze the alignment of day care operations to ABC's mission or provides some recommendations for improvement. Competent — The candidate analyzes the alignment of day care operations to ABC’s mission and provides several recommendations for improvement. ‘Competent with distinction — The candidate analyzes the alignment of day care operations to ABC's mission in depth and provides many recommendations for improvement. Proposed System ‘There are significant weaknesses with the proposed check-in system that must be corrected before implementation. Privacy The system will be operated over a public wireless internet connection so that parents can check in their children via the mobile app. This risks the privacy of child and caregiver personal information as a public wireless connection is open and not password protected. Anyone can utilize this network to hack into the application and access sensitive personal information. The system should be operated over a password protected and encrypted wireless connection. Parents can use their mobile data connection to access the mobile app or check in the child on the day care's tablet as appropriate. Child identifier The system uses the child’s phone number as an identifier for the child. Not all caregivers, nor day care staff, are likely to know the child's phone number (ie., occasional drop-offs by extended family) or which phone number may have been used. This could result in delays during the check- © 2018, Densmore Consulting Services Inc, All Rights Reserved, ‘Mock Common Final Examination Day 3 Page 8 in process, which could cause parents to become irritated if they are in a rush to drop off children during busy periods to get to work on time. Each child should be identified using their last name, which would call up a list of children associated with that name. The correct child can then be selected from a list for easier and faster check-in. Use of stickers The system uses a bar coded sticker to identify the child that has been dropped off. Stickers are easily lost, either because the piece of clothing they are attached to has been taken off, or because they lose their stickiness and are no longer attached to the child. There does not appear to be a manual check-out option for a child, which will also cause delays and potential issues with record keeping. If staff cannot record a pick-up in the system, they also will have trouble at the end of the day with closing the day care as all children must be shown as checked out on the system before day care staff can leave for the day. Students should be provided with tags, either safety pinned to clothes, or worn on lanyards around their necks, to minimize the risk of loss of the bar code, The system also requires a back-up ‘option whereby a supervisor can override the need for the scan in special circumstances, such as a lost tag Use of tickets The system uses bar coded tickets to provide to the caregiver who checked-in the child. This ticket must be presented to check-out the child. However, often different caregivers drop off and. pick up children. If the caregiver is not the same as the one who dropped off the child, they will not have the ticket required for pick-up. There does not appear to be a manual check-out option for this situation. Similarly, ifthe ticket is lost during the day, there does not appear to be a back- up procedure. Caregivers should be encouraged to text a picture of the ticket to the caregiver who is picking up the child if the ticket cannot be exchanged. In emergency situations, caregiver identification that matches the approved caregivers on file should be accepted. The system requires @ back-up option whereby a supervisor can override the need for the ticket in these special circumstances. Verification of caregiver The system assumes that anyone holding the bar coded ticket is approved to pick up the child. This may not be the case. This puts the safety of the child at risk if an unapproved person is, attempting to pick up the child. Day care staff should routinely check identification for any person presenting a ticket who is unfamiliar to the staff. Anyone picking up children must be on the approved caregiver list for that child. © 2018, Densmore Consulting Services Inc. All Rights Reserved. Mock Common Final Examination Day 3. Page 9 For Assessment Opportunity #6, the candidate must be ranked in one of the following five categories: Not addressed — The candidate does not address this assessment opportunity. Nominal competence — The candidate does not meet the standard of reaching competence. Reaching competence — The candidate discusses some weaknesses with the proposed check- in system and provides some recommendations for improvement. ‘Competent - The candidate discusses several weaknesses with the proposed check-in system and provides several recommendations for improvement. ‘Competent with distinction — The candidate discusses many weaknesses with the proposed cheok-in system and provides many recommendations for improvement. Personal Tax Treatment Child care expenses are costs paid to have someone look after an eligible child so the parent can either earn income from employment, carry on business or attend school. Both the day care and day camp costs are considered child care expenses as they are paid to an eligible child care provider (i.e., ABC) to care for the children. An eligible child is any child dependent on the parent that is under age 16 during the year. The child must have lived with the parent in order for the parent to claim the expenses and the expense is typically claimed by the lower income earner. However, since this parent is divorced and has shared custody, both parents may claim a deduction for the year. This deduction must only be for expenses incurred during the period the children resided with the parent and only to the extent that the expenses were paid by that parent to meet the criteria listed above. Its assumed that the primary goal of the day camp is the care of the children and therefore fees paid for the day camp would be eligible for the child care deduction. The weekly limit does not apply to the fees (j.c., the weekly limit for the 8-year-old would be $125/week) because it is a day ‘camp with no overnight stays. Child care expenses can be deducted from income at the least of three amounts: + Child care expenses paid (supported by receipt from ABC) + Annual child care expense amount (for children under age 7, there is an annual child care expense amount of $8,000; for children 7 and over, the annual child care expense amount © 2018, Densmore Consulting Services Inc, All Rights Reserved Mock Common Final Examination Day 3 Page 10 is $5,000) — this is annual limit per child, which means it needs to be shared between the parents ‘+ 2/8 of earned income (includes employment income including taxable benefits, self- employment net income, certain governmental financial assistance, etc.) There is no requirement that these amounts be spent on a specific child. Therefore, the parents will be able to claim up to a total of $13,000 ($8,000 for the 4-year old and $5,000 for the 8-year old). This amount is subject to the expenses actually paid for the time the children lived with each parent and their earned income for the year. For Assessment Opportunity #7, the candidate must be ranked in one of the following five categories: Not addressed ~ The candidate does not address this assessment opportunity. Nominal competence — The candidate does not meet the standard of reaching competence. Reaching competence — The candidate attempts to discuss the personal tax treatment for the day care and the day camp costs. ‘Competent — The candidate discusses the personal tax treatment for the day care and the day ‘camp costs. Competent with distinction — The candidate discusses the personal tax treatment for the day care and the day camp costs in depth. © 2018, Densmore Consulting Services Inc. All Rights Reserved. Mock Common Final Examination Day 3. Page 11 EXHIBIT | INDOOR PLAYGROUND PRICING Purpose: To determine an appropriate admission price to charge for the indoor playground, Analysis: Expected total annual admissions (Note 1) Break-down of admissions (Note 2): Children two years of age and under (31,500 x 35%) Equivalent full price admissions (11,025 / 2) Children over two years of age (31,500 x 50%) Full price admissions (A + B) Total cost: Variable operating costs ([11,025 + 15,750] x $1.67) Fixed operating costs Total costs to cover Price ($211,314 + $50,000 pre-tax profit] / 21,263) Conclusior 31,500 Note 1 11,025 5513 A 15,750 B 21,263 $ 44,714 Note 3 166,600 Note 4 $211,314 $ 12.29 To achieve a pre-tax profit of $50,000, the playground must charge $12.29 for children over two years of age and $6.15 ($12.29 / 2) for children two years of age and under. Notes: 1. Expected total annual admissions is 31,600 based on probabilities calculated as (20,000 + 25,000) / 2 x 0.1 (25,001 + 30,000) /2 x 0.2: (30,001 + 35,000) /2 x 0.3: (35,001 + 40,000) / 2 x 0.1 (40,001 + 45,000) / 2 x 0.1 3,375 6,875 1,375 5,625 4,250 2. Children under two years of age are usually provided with admission at half price. Adults are usually provided with free admission on entry with a child so excluded from full price admissions. 3. To isolate the variable component of the cost, the wilh method was Uséd.” Variable operating costs calculated as: ($250,100 - $200,000) / (50,000 - 20,000) = $1.67. Adult admissions not included in calculation because they do not use facilities nor incur many of the variable costs (anly there to supervise children), 4, When using the low-high method, either the low or high level can be used to calculate the fixed cost component. $166,600 Fixed operating costs calculated as: (© 2018, Densmore Consulting Services Ine. All Rights Reserved. $200,000 - (20,000 x $1.67) = cic ‘Mock Common Final Examination Day 3 Page 12 EXHIBIT I PROFITABILITY ANALYSIS Purpose: To determine the profitability of each location. Analysi Mount Pleasant Bramalea Royal Garden Number of children 50 40 30 Toddler (30%) 15 12 9 Toddler daily rate $75 $75 $75 Average attendance 240 240 240 Toddler revenues $270,000 $246,000 $162,000 Preschool (70%) 35 28 24 Preschool daily rate $50 $50 $50 Average attendance 240 240 240 Preschool revenues $420,000 $336,000 $252,000 Total revenue $690,000 $552,000 $414,000 Costs: Lease (Note 1) 96,000 85,200 79,200 Labour — staff (Note 2) 324,000 252,000 216,000 Labour — supervisors (Note 3) 80,000 40,000 40,000 ‘Supplies (Note 4) 40,000 40,000 40,000 Maintenance and cleaning (Note 5) 12,000 12,000 16,000 Food services (Note 6) 67,000 53,600 40,200 Administrator (Note 7) 46,000 16,000 16,000 Total costs 635,000 498,800 447,400 Pre-tax income $85,000 $53,200 $,(33,400) Conclusion: ‘Therefore, Mount Pleasant and Bramalea are both profitable, while Royal Garden is operating at alos. © 2018, Densmore Consulting Services Inc. All Rights Reserved. Mock Common Final Examination Day 3. Page 13, EXHIBIT Il (continued) PROFITABILITY ANALYSIS Notes: 41) Lease costs calculated as monthly cost x 12 months. Lease costs are $8,000 per month at Mount Pleasant, $7,100 at Bramalea and $6,600 at Royal Garden. 2) Day care centres in Ontario are required to have a minimum child to staff ratio of 4:1 for toddlers and 8:1 for preschoolers. Labour costs calculated as follows (rounded up to meet the minimum child to staff ratios) Mount Pleasant 15 toddler / 4 = 4 staff 35 preschool / 8 = 5 staff 9 staff x $18.75 per hour x 8 hours x 240 days = $324,000 Bramalea 12 toddler / 4 = 3 staff 28 preschool / 8 = 4 staff 7 staff x $18.75 per hour x 8 hours x 240 days = $252,000 Royal Garden 9 toddler / 4 = 3 staff 21 preschool / 8 = 3 staff 6 staff x $18.75 per hour x 8 hours x 240 days = $216,000 3) Mount Pleasant has two supervisors and there is one supervisor at each of the other locations. Each supervisor is paid $40,000 annually. 4) Supplies cost $120,000 annually and are equally dispersed by Kimiko among each location. 5) Maintenance and cleaning costs $40,000 annually, but Royal Garden costs $4,000 more than the other locations due to age. Calculated as: $40,000 - $4,000 = $36,000 / 3 = $12,000; $16,000 for Royal Garden, 6) Food services cost $160,800 annually and would vary based on the number of children (assume the cost of food is the same per child, regardless of whether toddler or preschooler). $160,800 / (50 + 40 + 30) = $1,340 per child Mount Pleasant = 50 children x $1,340 per child = $67,000 Bramalea = 40 children x $1,340 per child = $53,600 Royal Garden = 30 children x $1,340 per child = $40,200 © 2018, Densmore Consulting Services Inc, All Rights Reserved. Mock Common Final Examination Day 3 Page 14 EXHIBIT Il (continued) PROFITABILITY ANALYSIS Notes (continued): 7) Kimiko's salary is a corporate cost that is not fully traceable to each day care centre and therefore is not allocated. The administrator processes registrations and manages day care centre operations. She does not keep track of her time by location, so the $48,000 annual Cost is split evenly across the three locations, Another acceptable alternative would be to allocate the administrator's salary based on the number of children per location since she processes registrations. Mount Pleasant = 50 / (50 + 40 + 30) x $48,000 = $20,000 Bramalea = 40 / (50 + 40 + 30) x $48,001 Royal Garden = 30 / (50 + 40 + 30) x $48,001 © 2018, Densmore Consulting Services Inc. All Rights Reserved. ABC DAY CARE CENTRE ‘Candidat Marker: ‘AOt ‘RO2 | AO3 | AOS | AOS | AO’ | AOT MA SG it MA. SG MA T ‘OVERALL COMMENTS (Marker notes: Consider ranking, time management, writing styl format, use of case facts, role) © 2018, Densmore Consulting Services Inc. All Rights Reserved. 1 ‘AOT- MA The candidate calculates a price to charge for the proposed indoor playground. RRC — The candidate attempts to calculate a price to charge for the proposed indoor playground, C~ The candidate calculates a reasonable price to charge for the proposed indoor playground, CD —The candidate calculates an accurate price to charge for the proposed indoor playground AND concludes whether this expansion plan is viable. Marker Notes Price to charg ‘+ Attempts = attempts total operating costs and expected total annual ‘admissions and considers $50K pre-tax profit + Reasonable = attempts variable vs. fixed operating costs and expected total annual admissions (attempts to consider expected breakdown of admissions) and considers $50K pre-tax profit to determine price to charge + Accurate = (variable operating costs at full price admissions + fixed operating costs + $50K pre-tax profi) divided by correct full price ‘admissions to determine price to charge Concludes = definitive conclusion on viability, supported by comparison to competitor pricing Ranking ‘Comments: © 2018, Densmore Consulting Services Inc. All Rights Reserved. KO2-86 The candidale analyzes the risk response allematives available for the rock climbing centre. RC — The candidate attempts to analyze some (2) of the risk response altematives: available for the rock climbing centre. C— The candidate analyzes some (2) of the risk response alternatives available for the rock climbing centre AND concludes on the best course of action CD ~The candidate analyzes several (3) ofthe risk response alternatives available for the rock climbing centre AND concludes on the best course of action. Marker Notes ‘Attempts = identifies altemative but superficial analysis with litleino use of case facts and/or relevant technical Analyzes = classifies the risk response alternative and explains alternative available and calculates the impact of using that alternative on ABC Risk response classifications: Risk reduction + Risk transference Risk acceptance © Risk avoidance Concludes = must be definitive and consistent with analysis Use of competitors pricing OK at RC, need integration from AO for C/CD Use of cost only (exclude admissions) OK at RC, need to offset costs with admission revenue for C/CD Ranking ‘Comments © 2018, Densmore Consulting Services Inc. All Rights Reserved, 3 ‘AO3-T The candidate discusses the HST implications for the new playground faciliy and the weekly day camps. RC — The candidate attempts to discuss the HST implications for the new playground facility or the weekly day camps, ~ The candidate discusses the HST implications for the new playground facility and the weekly day camps. CD ~The candidate discusses the HST implications for the new playground facility and the weekly day camps in depth. Marker Notes Playground facility * Attempts = 2 implications Discusses = 3 implications 4 implications, 1 of which must be primary purpose Implications: © Primary purpose to provide entertainment (supported) so taxable supply © Claim ITCs for HST paid on operating expenses © Claim ITCs for HST paid on capital property © Registration required when $30K sales reached OR register before purchases made (supported) © Taxation of basic groceries (fru, milk, crackers) © Taxation of chocolate bars © Taxation of pop Day camps: ‘+ Attempts = meets definition of child care services so exempt supply (OK if does not consider taxable supply) + Discusses = meets definition of child care services (supported) so exempt supply + not eligible for ITCs though considers taxable supply + In depth = discusses + considers purpose of indoor playground (taxable or exempt) and impact on ability to claim ITCs for HST paid on either operating expenses or playground equipment + track costs between taxable and exempt or exempt < 10% Ranking ‘Comments © 2018, Densmore Consulting Services Inc. All Rights Reserved, 4 ‘O4—MA The candidate analyzes the pre-tax profitability of the day care locations. RC — The candidate attempts to analyze the prevax proftabilly of the day care locations. C ~The candidate analyzes the pre-tax profitability of the day care locations. CD ~The candidate accurately analyzes the pre-tax profitability of the day care locations. Marker Notes | Attempts = calculates pre-tax profit for each location with revenue less 3 costs, ‘minor errors OK Analyzes = calculates pre-tax profit for each location with correct revenue less 4 correct costs, adjustments must be supported with case facts Accurately = calculates pre-tax profit for each location with correct revenue less 5 correct costs (one of which must be labour), adjustments must be supported with case facts Costs: + Lease + Labour— staff + Labour — supervisors + Supplies + Maintenance and cleaning + Food services + Administrator Ranking ‘Comments: © 2018, Densmore Consulting Services Inc. All Rights Reserved. KOs-SG The candidate analyzes the alignment of day care operations to ABC's mission and provides recommendations for improvement. RC — The candidate attempts to analyze the alignment of day care operations to ABC's mission OR provides some (2) recommendations for improvement, C— The candidate analyzes the alignment of day care operations to ABC’s mission AND provides several (for the 3 discussed) recommendations for improvement. (CD — The candidate analyzes the alignment of day care operations to ABC's mission in depth AND provides many (for the 4 discussed) recommendations for improvement. Marker Notes ‘Alignment to missio + Attempts = discusses 2 areas of misalignment + Analyzes = discusses 3 areas of misalignment + In depth = discusses 4 areas of misalignment + Discusses = identifies an area where operations are not aligned with ABC's mission supported by case facts with explicit ink to mission and explains the impact on ABC (e.g,, why it's a problem) Recommendations = must be specific and must make sense given the nature of ABC's operations Ranking ‘Comments IDENTIFIES DISCUSSES. RECOMMENDATION Cleanliness: Teasing Lack of physical activi Lack of story time Rude staff fl © 2018, Densmore Consulting Services Inc. All Rights Reserved. 6 ‘AO6— MA The candidate discusses weaknesses with the proposed checkin system and provides recommendations for improvement. RC The candidate discusses some (2) weaknesses wih the proposed check-in system AND provides some (2) recommendations for improvement. C~ The candidate discusses several (3) weaknesses with the proposed check system AND provides several (for the 3 discussed) recommendations for improvement CD ~ The candidate discusses many (4) weaknesses with the proposed check-in system AND provides many (for the 4 discussed) recommendations for improvement. Marker Notes Discusses = identifies a weakness with the proposed check-in system using case facts and explains the impact on ABC (e.g., why it's a problem) Recommendations = must be specific and must make sense given the nature of ABC's operations Ranking ‘Comments: IDENTIFIES DISCUSSES RECOMMENDATION Privacy ‘Child identifier Use of stickers Use of tickets Verification of caregiver Other vali © 2018, Densmore Consulting Services Inc. All Rights Reserved i ‘AOT=T The candidate discusses the personal tax treatment for the day care and the day camp costs. RC — The candidate atfampts fo discuss the personal fax treatment for the day care and the day camp costs. (© —The candidate discusses the personal tax treatment for the day care and the day camp costs. ‘CD — The candidate discusses the personal tax treatment forthe day care and the

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