1. BC Co.s partial income statement for its first year of operations is as follows:

Income before income taxes $ 1,750,000

Provision for income taxes:

Current $ 483,000

Deferred 42,000 525,000

Net income $ 1,225,000

BC Co. uses straight-line depreciation for financial reporting purposes and CCA for tax purposes. The depreciation expense for the year was $700,000. Except for depreciation, there were no other differences between accounting income and taxable income. Assuming a 30% tax rate, calculate what amount was claimed for CCA on the corporation's tax return for the year.

2. State how the effective tax rate is calculated; no numeric illustration.

3. BC Co. reported an equal taxable and accounting loss of $130,000 for 2020. Its taxable incomes and statutory tax rates for the last three years were as follows:

2017 $ 50,000; 30%

2018 $ 60,000; 25%

2019 $ 80,000; 24%

Determine the amount that BC Co. will report net loss for financial reporting purposes in 2020.

4. On July 1, 2020, BC Co., a dealer in machinery and equipment, leased equipment, with a useful life of 12 years, to NS Co. The lease term is ten years. BC Co. requires ten equal annual payments of $65,100 on July 1 of each year which includes an annual maintenance contract of $3,000 and priced the lease to earn 8%, known to NS Co. NS Co. made the first payment on July 1, 2020. For tax purposes, at the end of the lease, title of the equipment will transfer to NS Co.

For the year ended December 31, 2020, and assuming that NS Co. uses straight-line depreciation, calculate how much 1. depreciation expense and 2. interest expense NS Co should report.

5. You are having a discussion with the CFO of your client, who has started expanding business by offering leases on their equipment to customers. The CFO remarks that this will be a challenging undertaking for the accounting department because the value of the Lease Receivable account will vary and be dependent upon whether the lease terms include a guaranteed residual value, unguaranteed residual value, bargain purchase option, or executory costs.

You pause and briefly reply to your client:

6. BC Co. began operations on January 1, 2019, and uses FIFO to cost its inventory. Management is considering a change to the average cost method and is interested in determining what effect such a change will have on pre-tax income. Accordingly, the following information has been developed:

Ending Inventory 2019 2020

FIFO $ 480,000 $ 540,000

Average cost 400,000 500,000

Pre-tax Income (calculated using FIFO) 750,000 900,000

Determine what the 2020 pre-tax income would be if BC Co. changed to weighted average method of valuing its inventory.

7. On January 1, 2017, BC Co. bought machinery for $800,000. The company applied double declining balance depreciation for this asset, with an estimated life of eight years, and an estimated $ 200,000 residual value. At the beginning of 2020, BC Co. decided to change to the straight-line method of depreciation for this equipment to better reflect asset utility and appropriately treated the change as a change in estimate.

Determine the depreciation expense to record on this machine for 2020.

8. BC Co. provided the following information for calendar 2020:

Proceeds from issuing bonds................................. $ 300,000

Purchase of inventories........................................ 570,000

Purchase of treasury shares.................................. 90,000

Purchase of long-term investment......................... 420,000

Dividends paid to preferred shareholders............... 60,000

Proceeds from issuing preferred shares.................. 240,000

Proceeds from sale of equipment.......................... 60,000

Determine the cash provided by (used in) investing activities during 2020.

9. In preparing a Statement of Cash Flows, an increase in accounts payable would require a deduction under which cash flow from operations format?

10. Presented below are four segments that have been identified by BC Co.:

Operating

Segments Total Revenue Profit (Loss) Assets

A $ 300,000 $ 40,000 $ 1,200,000

B 800,000 (70,000) 1,200,000

C 300,000 6,000 600,000

D 120,000 8,000 300,000

Applying the IFRS recommended thresholds, identify which segments would be considered reportable.

11. In January 2020, BC Co. estimated that its year-end bonuses to executives for calendar 2020 would be $960,000. In February 2020, $870,000 was paid in bonuses for the 2019 year-end. The estimate for 2020 is subject to year-end adjustment and by March 31, 2020 BC Co. was meeting all of its budgeted targets. Determine, if any, the bonus expense that should be reported in BC Co.s interim income statement for the three months ended March 31, 2020.

12. BC Co. had the following transactions during the quarter ended March 31, 2020:

Loss due to theft.................................................. $ 189,000

Payment of fire insurance for calendar year 2020... 270,000

Determine the total (one figure) impact these events would have on the interim Statement of Comprehensive income for the quarter ended March 31, 2020.

13. Your audit client, BC Co., has asked you how to handle the reporting of several situations that have occurred during the audit of the accounts for the year ended December 31, 2020. BC Co. wants to know only if adjustments will or will not be required to the year ended December 31, 2020. You provide your reply.

a) major losses as a result of a fire in the companys plant on January 17, 2021

b) decline in the fair value of investments due to a sharp market correction on February 12,

2021

c) loss on an account receivable (on the books at December 31, 2020) resulting from a customers bankruptcy

d) lawsuit launched on January 23, 2021 by a customers injury due to an alleged defective

product

14. What is the most fundamental assumption regarding related party transactions that gives rise to the extensive disclosure requirements surrounding related party transactions?

15. BC Co., with a 26% tax rate, is wrapping up the audit of its financial year end December 31, 2020. During 2020 a customer sued the company for product defect and, in consultation with their legal counsel, BC Co. provided a provision for settlement of $250,000 (recorded as estimated legal liability) at December 31, 2020. On February 20, 2021 after the financial statements for 2020 had been issued, the court awarded a final settlement of $200,000 to the plaintiff. Provide the entries required to report the settlement.

16. Irrespective of the basis of segmentation, a high quality segmented reporting disclosure will always be presented in what manner to assist the reader?