Professional Documents
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Paper 3 PDF
Paper 3 PDF
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 March 31, 2013, or in accordance
with the provisions proposed at March 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 CICA-provided 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 Canadian Institute of Chartered Accountants (CICA) and Certified Management Accountants of Canada (CMA) joined together
January 1, 2013, to create Chartered Professional Accountants of Canada (CPA) as the national organization to support unification of the
Canadian accounting profession under the CPA banner. The Uniform Evaluation (UFE) is still being developed and provided under the direction
of CICA until final offerings of the CA program are complete.
2013
Chartered Professional Accountants of Canada
277 Wellington Street West, Toronto, Ontario, Canada M5V 3H2
Printed In Canada
(CONTINUED ON PAGE 2)
2013 Uniform Evaluation Paper III Page 2
III
SIMULATION 1 (90 minutes)
It is August 15, 2013, and you, CA, are called into the office of Patricia Gonsalves, a partner at Princess
& Gonsalves.
Patricia begins, “We have started our field work on the audit of Enterprise Technology Systems Inc.
(ETS), which operates across the country. ETS is primarily engaged in the sale of software and new and
refurbished hardware.
“During the audit, the staff person in charge of the engagement left the firm to pursue another
opportunity. I want you to look at the work done to date (Exhibit I) to identify additional procedures that
need to be performed and issues related to the procedures already done. Please also provide
recommendations on any accounting issues you identify in the June 30, 2013 year-end file.
“Although ETS has experienced losses in some years, management is expecting to be profitable going
forward due to the company’s new line of business selling refurbished servers. ETS has been trading on
the TSX-V (stock exchange for small venture companies) for about five years now and reports under
International Financial Reporting Standards (IFRS).
“Finally, the chief financial officer (CFO) implemented some new IT controls in an effort to make the
system more automated (Exhibit II). Please evaluate the effectiveness of the controls and explain how
they might affect our audit.”
(CONTINUED ON PAGE 3)
2013 Uniform Evaluation Paper III Page 3
III
SIMULATION 1 (continued)
EXHIBIT I
Cash
I have obtained copies of the bank reconciliation and the bank statement as at June 30, 2013.
(CONTINUED ON PAGE 4)
2013 Uniform Evaluation Paper III Page 4
III
SIMULATION 1 (continued)
EXHIBIT I (continued)
Accounts Receivable
I reviewed the aged receivables and sent out confirmations as indicated below. I picked customers that,
according to management, would be quick to respond. All confirmations have been returned and no issues
were noted.
# of Days Outstanding
Balance
per Balance per
Customer Name 0 – 30 31 – 45 46 – 60 61 – 90 90+ Listing Confirmation Difference
Frank’s Supermarket 12,456 24,000 36,456 36,456 –
We Sell Good Stuff 50,000 18,000 68,000 68,000 –
Randall Stevens Inc. 765,999 765,999 No confirmation sent
Cupcake Girls 48,000 48,000 48,000 –
Twins Therapeutics 1,750,000 1,750,000 No confirmation sent
Kay Plumbing 280,868 135,678 416,546 416,546 –
9841236 Inc. 3,250,000 3,250,000 No confirmation sent
Farrow & DeJaegher 499,999 499,999 No confirmation sent
Tools Tools Tools 299,000 299,000 299,000 –
Total 6,559,322 349,000 135,678 42,000 48,000 7,134,000
Therefore, we have obtained comfort over the existence and valuation of accounts receivable. There is no
allowance for doubtful accounts at year end and this appears reasonable.
Inventory
ETS buys used or broken point-of-sale items (cash registers, bar code scanners, etc.), which it then repairs
and sells. Any item that requires significant work or new parts is scrapped. Inventory is reclassified from
parts to scrap in the accounting records when ETS determines that the problems are not worth fixing.
(CONTINUED ON PAGE 5)
2013 Uniform Evaluation Paper III Page 5
III
SIMULATION 1 (continued)
EXHIBIT I (continued)
I attended the inventory count on June 30, 2013, and completed test counts from sheet to floor with the
following results:
Units per Units per
ETS Total Cost Test Count Difference
Stationary scanners 2,007 $ 404,842 2,009 (2)
Broken registers 626 585,934 623 3
Refurbished servers 372 208,994 372 0
Portable scanners 452 214,411 452 0
Debit machines 194 236,187 194 0
Scrap 403 199,101 403 0
Given that my tests were relatively close to the figures provided, I concluded that there were no concerns
with the inventory. There were some piles of stuff that I didn’t count, but since they were not on the
listing, I assumed they were scrap items that had been written off.
Convertible Debt
ETS borrowed $4 million from PIC Investments (PIC), and recorded it as long-term debt on the balance
sheet. PIC can convert the debt into 10,000 ETS common shares at any time, which represents a minimal
shareholding of ETS. The debt was issued on January 1, 2013, and bears interest at 6%, payable annually.
The debt will mature on December 31, 2017. PIC was willing to provide the loan at 7% without the
conversion clause.
Due to the profit generated this year, ETS has recognized an asset related to its existing loss
carryforwards.
Net Loss
Carryforward Estimated
for Tax Deferred Tax Expiry
Purposes Assets at 29% Year
$ 5,003 $ 1,451 2014
7,170 2,079 2015
8,485 2,461 2031
1,597 463 2032
$ 22,255 $ 6,454
(CONTINUED ON PAGE 6)
2013 Uniform Evaluation Paper III Page 6
III
SIMULATION 1 (continued)
EXHIBIT I (continued)
ETS provided me with the financial projection to support the deferred income tax balance. Management is
projecting a 21% annual increase in revenue. They stated that they believe a 3% improvement in gross
margin is sustainable. They also indicated that they would keep other expenses under control for the next
three years and, as a result, are projecting no increase in expenses. I took the following information from
their financial projection:
During the year, ETS started selling servers they had refurbished. This new line of business has proven to
be very popular and ETS has sold approximately 2,000 servers this year, with revenue totalling about
$5 million. Included in the price of the server is a two-year maintenance plan provided by ETS. Similar
maintenance plans retail for $500. ETS records the entire revenue when servers are shipped to customers.
After delivery, ETS installs the servers and asks the customers to sign an approval form acknowledging
that the servers interface properly with their system. On average, ETS spends two weeks installing each
server and ensuring it interfaces properly with the customer’s system.
ETS requires payment within 30 days of shipment. Collection rates have been strong thus far.
(CONTINUED ON PAGE 7)
2013 Uniform Evaluation Paper III Page 7
III
SIMULATION 1 (continued)
EXHIBIT II
Payroll
We used to have an entire team reconciling commissions paid to our sales staff based on their monthly
sales, but have now automated this process. We implemented a control to ensure that the 2% commission
paid to everyone matches the amounts calculated by the system. If the commission calculated does not
match the payroll system, the system will automatically suspend the payment until variances are
explained.
Here is the May 2013 report. I haven’t had a chance to look into the variance.
Purchasing
Only a few employees are authorized to sign cheques. We never found issues because all purchases have
to be approved, and accounts payable does a good job of tying invoices to shipping documents, but we
used to spend hours signing cheques and reviewing supporting documentation. Now accounts payable
uploads all approved invoices into the system and generates a report. I access the report through the
system and indicate “Yes” or “No” in the approved column. Once I enter “Yes,” my signature is printed
automatically. If I enter “No” in the approved column, the invoice goes unpaid until I change the status. I
included an example approval report below.
(CONTINUED ON PAGE 8)
2013 Uniform Evaluation Paper III Page 8
III
SIMULATION 1 (continued)
EXHIBIT II (continued)
We process sales on a system called Sell It. Once a customer places an order, the sales representative
enters the relevant information (customer name, address, item code, number of items, and discount, if
applicable) into the system. Then, the following automated checks are performed:
The customer name is checked against the master list to determine if it is a new customer. If new, the
system generates an email asking the sales manager to approve the transaction and the addition of the
customer to the master list.
If a discount is provided to the customer, the system notifies the sales manager and requests their
approval. The controller has also started reviewing every discount in detail at month end, and has been
noticing an unusually high volume of discounts.
If the sale pushes a customer over its approved credit limit, the system automatically denies the sale.
Credit limits are stored with the master customer list.
The master customer list is located on the server and its file path is detailed in the IT policy manual.
Once the sale has been approved, the system will send a message to the shipping department, which will
get the items ready for shipment.
After shipment occurs, a shipping number and date are added to the sales record and a notice is sent to the
sales representative. This allows the sales representative to inform the customer of the expected delivery
date.
Sales for shipped orders are run through batch invoicing every Friday, and until then the files are stored
on the server in a file folder called “Shipped but not invoiced.”
On Friday, the invoicing process extracts the data from the files and generates invoices and the necessary
accounting entries. The files are moved to the “Invoiced” folder. The system produces a report that lists
the time and date when a file was created or amended. However, the report is so long that we never look
at it.
All sales staff are made aware of the location of all the folders on the server in case they need to review
an invoice.
At the end of the month, the new amounts recorded in the “Invoiced” folder are totalled to determine the
monthly sales for each sales representative. Sales commission is allocated to “Selling and marketing” for
financial statement presentation purposes.
(CONTINUED ON PAGE 9)
2013 Uniform Evaluation Paper III Page 9
III
SIMULATION 1 (continued)
EXHIBIT II (continued)
One of the benefits of the system is that it lets us track employee performance and update personnel files
each month. We keep the master personnel files in the same directory as the master customer list. That
way, all the information our controller needs is in one place.
We strongly believe that all employees, from clerks to vice presidents, should be treated the same, so we
have provided all of our employees with the same server and system access. We ask them to only change
data they are responsible for.
It is September 13, 2013. You, CA, have recently accepted a position as the chief accountant for
Rent-a-Bike Inc. (RAB), which is a public bike rental system. RAB offers an alternate means of urban
transport through its networks of bike stations located throughout the downtown cores of Toronto,
Montreal, Ottawa and, most recently, Halifax. RAB bikes can be rented seven days a week, 24 hours a
day. Annual and monthly memberships are available, in addition to a pay-per-use option.
Your new boss, the CEO of RAB, Lochlyn Grace, comes into your office. “We’ve experienced strong
growth since our opening just four years ago and have a number of exciting new projects on which I’m
eager to get your input. As you know, our plan is to maintain our momentum. We’re currently debating
either expanding in Toronto or breaking into the Vancouver market. We’ve prepared some financial
information and would like your analysis of each alternative (Exhibit I).
“We’re also hoping to increase the loyalty of our existing customer base as well as the visibility of our
bikes. To do so, we’ve launched two promotions this year. We have a planning meeting with our auditors
next week. Please make sure you address the new accounting issues encountered this year, including how
to account for the new promotions. Our accounting clerk has compiled a list of the accounting issues
(Exhibit II).
“There’s one other important thing we need to discuss with the auditors. This summer we received a grant
from the Ontario Ministry of Tourism, Culture and Sport to install additional stations and provide extra
service during the Canada Games, which took place in Ottawa in June (Exhibit III). I know we are
supposed to report our compliance with the grant requirements. Is this covered as part of the regular
audit? If not, what do you think the Ministry will require? Please be specific, as I’d like to know which
potential reports could be prepared and what procedures our auditors would need to perform under each
type of report.”
EXHIBIT I
Background
RAB bikes are parked in stations that are strategically located around the downtown core. Each station
has one pay meter and 10 individual slots for parking and locking bikes.
Customers can become members by purchasing annual or monthly memberships. Annual memberships
are based on the calendar year (no pro-ration is made for part years). A member is assigned an access
code to check out a bike and subsequently check it back into a station at their destination. Non-members
can use RAB bikes, but must use a credit card at the pay meter to secure a deposit before receiving the
access code.
Operational Information
RAB headquarters in Toronto is able to monitor in real time the number of bikes parked at every station
in Canada. An alert goes out when a station is either below or above the optimum number of bikes, which
is eight. Given how important it is to have no stations completely empty or full at any given time, RAB
has trucks that roam around each area, prepared to replenish empty stations or pick up bikes from full
stations based on either notification received from headquarters or the staff’s own visual inspections.
While roaming the RAB areas, the staff also checks on each station on a rotational basis to watch for
bikes that need servicing or customers who need assistance. A detailed log of the date and time the staff
visits each station is maintained for each truck. The logs are sent to RAB headquarters on a daily basis. In
addition to providing alerts to headquarters, the system generates an hourly report providing the number
of bikes parked at each station at that point in time. These reports are maintained at headquarters and
reviewed on a weekly basis by RAB supervisors.
EXHIBIT I (continued)
Expansion
RAB is currently considering expanding its operations by establishing 60 new bike stations, either in
Toronto, to extend northwest of the downtown core, or in Vancouver, to break into a new market. RAB
has therefore ordered the manufacture of 60 new stations and enough bikes to support the optimal
capacity of eight bikes per station.
Toronto
There are currently 100 stations located within a nine-square-kilometre area in the downtown core. The
additional stations would be spread over a further six square kilometres.
RAB’s sales and marketing team has estimated that in the first year these new stations would result in 600
additional monthly memberships each month (rate of $25/month) and 5,000 additional annual
memberships (rate of $100/year). The Toronto bikes are available 12 months of the year. RAB’s pay-per-
use revenue in Toronto is typically about 50% of total annual and monthly membership fees combined.
Since RAB has an advertising agreement in Toronto allowing KingBank to put its logo on the bikes, it
would be able to generate an additional $175 per bike each year. Further bike usage growth of 10% is
anticipated to occur within one year, but growth beyond this would not be possible because capacity
would be reached.
In addition to the costs of the bikes and stations, annual costs associated with the new stations would
include bike maintenance of $50 per bike; truck operating costs and maintenance of $200,000; wages of
$160,000; general and administrative costs of $100,000; and rental of the space for each station of, on
average, $100 per month.
Vancouver
This would be RAB’s first foray into the western Canadian market, so all estimates provided by RAB’s
sales and marketing team are considered uncertain.
RAB’s team anticipates that the bikes would operate for 12 months of the year in Vancouver. The team
has estimated that installing the stations would generate 800 monthly memberships each month (rate of
$35/month) and 3,000 annual memberships (rate of $90/year) in the first year. RAB’s pay-per-use
revenue in new markets tends to be 75% of annual and monthly memberships combined. In the second
year of operations, RAB anticipates that overall revenue would increase by 25%, and then by 10% the
third year, but additional investment would be required for further growth.
In addition to the costs of the bikes and stations, annual costs associated with the new stations would
include bike maintenance of $100 per bike (moisture is tough on bikes); truck operating costs and
maintenance of $300,000; wages of $200,000; general and administrative costs of $100,000; and rental of
the space for each station of, on average, $50 per month.
EXHIBIT II
In preparation for the December 31, 2013 audit, I have provided information on a number of new
promotions and transactions that have occurred (or will occur) this year. I would like your input on how
to account for each of the following items in accordance with Accounting Standards for Private
Enterprises (ASPE).
Promotions
Toronto
To increase RAB’s visibility during the winter months, when bike usage typically declines, RAB is
offering a new promotion to Toronto members. All annual members who check out a RAB bike more
than 75 times in total during December through March will receive a 25% refund of their 2013 annual
memberships. RAB anticipates that of the 10,500 annual Toronto members, 20% will attain the goal and
be eligible for the rebate. How do we account for this in 2013 and in future years if we continue to offer
this promotion?
Ottawa
To encourage long-term membership, RAB offered anyone purchasing a 2013 annual membership in
January 2013 a 50% discount on their 2014 annual membership, if purchased at the same time. Therefore,
the customer gets the benefit of a two-year membership for only $120. Annual membership in Ottawa is
$80, and 1,050 people took advantage of the promotion.
In June 2013, RAB received a payment of $150,000 pertaining to a grant from the Ministry. This funding
relates to installing and servicing eight additional stations in the vicinity of the 2013 Canada Games
Sports Complex. Costs of $145,000 were incurred to purchase and install the stations and bikes. An
additional $10,000 in costs was incurred in relation to the service portion of the agreement. I have simply
recorded the $150,000 cash receipt as government grant revenue.
EXHIBIT II (continued)
RAB 1 Bikes
We own 120 bikes (model RAB 1) currently in use in Toronto that were purchased four years ago. We
originally believed these bikes would be used for eight years, but shortly after we bought them, we were
able to negotiate a contract with a different manufacturer to create a much less expensive and lighter bike
(model RAB 2). The RAB 1 bikes still work fine, but they feel heavier and are not nearly as nice as the
newer ones.
Last month, our operations manager obtained approval from Lochlyn and the board of directors to sell the
entire fleet of RAB 1s and replace them with RAB 2s. Last week, he negotiated a contract to sell all the
RAB 1s to a summer camp for $40,000, with the deal closing on June 1, 2014. The camp has agreed to let
us continue to use the bikes until then. As of right now, the fleet of bikes has a carrying amount of
approximately $45,000. Our cost to transport the bikes to the camp is estimated at $1,000.
Our Halifax RAB bikes have been in operation for just over a year. Our RAB 2 bikes, which cost
$90,000, were brought to Halifax last year. We assumed that they would have a useful life of six years,
similar to our bikes in Ontario and Quebec. However, after only a year, we’re already starting to see rust
on some of the frames, and the wheels need repair much earlier than in other locations. Our operations
manager says that he can’t see them lasting longer than three more years. Currently we record straight-
line depreciation over the life of the asset, assuming minimal salvage value.
EXHIBIT III
The following excerpts have been taken from the agreement between Rent-a-Bike Inc. (“RAB”) and the
Ministry of Tourism, Culture and Sport (the “Ministry”), dated April 12, 2013.
1. RAB will install eight stations at specific locations in Ottawa, as dictated by the Ministry, by June 1,
2013.
2. RAB will maintain a minimum of one bike and a maximum of nine bikes at each station between the
hours of 8:00 a.m. and 11:00 p.m. for the period from June 15 to June 30, 2013. Any variations from
the established minimum and maximum numbers shall last no more than 15 minutes.
3. RAB will provide a dedicated maintenance/service truck on call for the eight stations between the
hours of 8:00 a.m. and 11:00 p.m. for the period from June 15 to June 30, 2013.
4. Effective July 1, 2013, RAB will be permitted to maintain the stations at these locations permanently,
without rental charge by the City of Ottawa.
5. The Ministry agrees to provide RAB with a payment of $150,000 on June 1, 2013.
6. The Ministry requires a report from RAB’s auditor supporting that the terms in this agreement have
been abided by. This report is due February 14, 2014.
It is September 16, 2013, and you are just about to sit down at your desk at Geeky and Keener Chartered
Accountants when one of the partners, Mr. Keener, says, “CA, I need your help with new clients to our
firm, John and Sheila Brown, who are looking for retirement planning advice.”
The partner proceeds to tell you that Sheila has health problems, so John is thinking of retiring without
waiting any longer. John sat down with the human resources manager at work to discuss his retirement.
The manager provided him with information relating to his two pension retirement options (Exhibit I).
John and Sheila are leaning towards option 2 because they don’t know if option 1 will provide them with
the same amount of cash before tax. Mr. Keener informs you that John and Sheila are in a meeting room
down the hall right now. “CA, go meet with them and gather as much information as you can. As I said,
they are new to our firm, and it’s important to me that we address any issues they might have.”
You proceed to meet with John and Sheila and take notes about their situation (Exhibit II).
The next day, Mr. Keener tells you he spoke with John the previous night. He wants you to put together a
report addressing which retirement option would be best for John, before tax. As the partner walks away,
he says, “John also mentioned they have always prepared and filed their own personal income tax returns.
He said they are always paying taxes and don’t know why. He gave me their most recent tax returns and
notices of assessment” (Exhibits III and IV).
EXHIBIT I
Dear John,
On the following page you will find details about your defined benefit pension plan with the company and
the options available to you.
We would like to point out that upon advising us of your decision to retire, you will have 90 days to
inform us of which retirement option you are choosing. Your retirement date will be January 1 of the year
following your notice to retire.
Under a defined benefit plan, a set annual pension payment is defined when you retire. This means you
won’t have to worry about the state of the economy or fluctuations in the market.
If you die before your spouse, your spouse will receive a one-time payout of $20,000 on your death
and will not be entitled to any additional future annual pension payments.
If you have any questions about your retirement, we would be happy to help you. Just give us a call.
Jane Smith
Jane Smith
Vice President, Human Resources
EXHIBIT I (continued)
MY RETIREMENT BENEFITS
Since you have been a member of the plan for 35 years, you are entitled to choose from the two
retirement pension options listed below.
OPTION 1
If you retire at age 60 or later, your annual pension of $42,997 will be payable for your lifetime
starting the year after you give notice of retirement. Should you choose to retire before age 60, your
annual pension will be reduced by 20%. This reduction stays in effect throughout your retirement.
If you retire before the point at which you choose to begin drawing your Canada Pension Plan (CPP)
benefit, you will receive an additional annual payment (bridge benefit) of $10,330 until you begin to draw
CPP.
OR
OPTION 2
If you retire at age 60 or later, you will receive a lump sum payment of $984,100 at the time of
retirement. Should you choose to retire before age 60, your lump sum payment will be reduced by 20%.
Other Information
Conventional wisdom suggests you need to consider economic uncertainty when making decisions about
retirement. Current investment portfolios average 3% growth annually.
We recommend using a life expectancy of age 90 for the purpose of financial planning.
EXHIBIT II
Client Details
John and Sheila are planning to give each of their children a significant amount of money sometime in
the near future to assist with the cost of tuition.
Sheila was diagnosed with multiple sclerosis in 2011. It got progressively worse until she was no
longer able to work. Rather than going on long-term disability, Sheila felt that, at her age, retirement
was a better option. She retired in June 2012 after working for 15 years as a receptionist. Sheila hopes
they can soon purchase a vacation property somewhere exotic, where the weather and lifestyle will be
more beneficial to her health. They are thinking of Fiji.
John and Sheila are very excited about retiring. Once retired, John plans to replace his old car with a
new high-end convertible. They also showed you a brochure for the big trip they hope to take — a
five-month cruise departing in January.
John will begin to draw from the Canada Pension Plan (CPP) at age 65, and his estimated annual CPP
income will be $6,500. He will also begin drawing old age security at age 65, for an annual benefit of
$6,300.
John and Sheila told me that they don’t have a lot of savings put away, but they are currently able to
cover all their annual living expenditures on the after-tax income they earn.
EXHIBIT III
EXHIBIT IV
Notice of changes and summary of assessment or re-assessment 2012 income tax return — JOHN
BROWN
This notice explains the results of our assessment. Based on the information you provided, your elected
split-pension amount is $0.
As of the date of this notice, you have unused net capital losses from other years of $5,500. However, if
you apply this amount to any year other than the current tax year, your unused balance may have to be
recalculated.
-----------------------------------------------------------
Notice of changes and summary of assessment or re-assessment 2012 income tax return — SHEILA
BROWN
This notice explains the results of our assessment. Based on the information you provided, your elected
split-pension amount is $0.
As of the date of this notice, you have unused net capital losses from other years of $0.
Based on the information you provided, you have been approved for the Disability Tax Credit for the
years 2009–2017.
As of the date of this notice, you have undeducted Registered Retirement Savings Plan (RRSP)
contributions available for use of $500.
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
2013 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
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 22
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
2013 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
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 23
III
2013 Uniform Evaluation Paper III Page 24
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 50 ................................................... 55%
Class 52 ................................................... 100%
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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