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In January 2014, Cig Ltd purchased tobacco for RMB60,000 and produced and sold cigarettes
What is the amount of consumption tax (CT) payable by Cig Ltd in January 2014?
A.RMB42,000
B.RMB42,900
C.RMB60,000
D.RMB77,100
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What is the amount of consumption tax (CT) payable by Cig Ltd in January 2014?
A.RMB42,000
B.RMB42,900
C.RMB60,000
D.RMB77,100
Alpha Trading Ltd (Alpha) is a value added tax (VAT) general taxpayer. On 1 January 2014, Alpha lent RMB200,000 to Beta Ltd at an interest rate of 10% per annum.
What is the type and amount of turnover tax which Alpha Trading Ltd will pay on the interest income received for the year 2014?
A.Business tax of RMB1,053
B.Business tax of RMB1,000
C.Value added tax of RMB3,400
D.Value added tax of RMB1,200
In 2013 Stine and Mering entered into a service agreement, by which Mering would provide meals to the employees of Stine. The service fees would be paid on a quarterly basis.
In June 2014, Mering was declared bankrupt by a court which designated a bankruptcy administrator responsible for the liquidation. The bankruptcy administrator found that Mering had failed to pay the rental for 2014. Stine claimed the rental due for the year of 2014 as his credit and requested to offset the meal service fees for the first and second quarters of 2014. Stine also declared dissolution of the leasing agreement between the two parties.
Required:
In accordance with the Enterprise Bankruptcy Law:
(a) State whether Stine’s request to offset the meal service fees was in conformity with the law. (2 marks)
(b) State how to deal with Stine’s request to dissolve the leasing contract. (2 marks)
(c) State what benefit Stine could have if its request to offset was accepted. (2 marks)
The audit is nearly complete and you are reviewing the audit working papers. The audit senior has brought several matters to your attention:
(a) Darren Co is working on a major contract relating to the construction of a bridge for Flyover Co. Work started in July 2014, and it is estimated that the contract will be completed in September 2015. The contract price is $20 million, and it is estimated that a profit of $5 million will be made on completion of the contract. The full amount of this profit has been included in the statement of profit or loss for the year ended 31 January 2015. Darren Co’s management believes that this accounting treatment is appropriate given that the contract was signed during the financial year, and no problems have arisen in the work carried out so far. (8 marks)
(b) A significant contract was completed in September 2014 for Newbuild Co. This contract related to the construction of a 20-mile highway in a remote area. In November 2014, several large cracks appeared in the road surface after a period of unusually heavy rain, and the road had to be shut for ten weeks while repair work was carried out. Newbuild Co paid for these repairs, but has taken legal action against Darren Co to recover the costs incurred of $40 million. Disclosure on this matter has been made in the notes to the financial statements. Audit evidence, including a written statement from Darren Co’s lawyers, concludes that there is a possibility, but not a probability, of Darren Co having to settle the amount claimed. (6 marks)
(c) For the first time this year, the financial statements are presented as part of an integrated report. Included in the integrated report are several key performance indicators, one of which states that Darren Co’s profit before tax has increased by 20% from the previous year. (6 marks)
Required:
Discuss the implications of the matters described above on the completion of the audit and on the auditor’s report, recommending any further actions which should be taken by the auditor.
Note: The mark allocation is shown next to each of the matters above.