Question

SCENARIO Angela has an annual contract with Stenbach Service Centre to provide property maintenance services; this includes lawn care, snow removal and parking lot maintenance. Angela spends, on average, 20 hours per week working at the company's premises and is paid a flat amount monthly. She hires part-time workers, when necessary, to assist her. Angela does not have any other clients. Angela uses her own small tools; however the company supplies and maintains a riding lawn mower and a snow plow for her use. Her contact at the company is Chris Moore, the Facilities Manager, who meets with her every Monday to discuss the work to be done that week. Chris approves Angela's monthly invoices and submits them to Accounts Payable. Does Angela have a contract of service or a contract for service with Stenbach Service Centre As the company's Payroll Supervisor, explain to Chris the process and factors you used to make your decision.

Answer 1

1.Answer:

	Market rate	Issue price
A	5%	$416,000
B	4%	$423,956
C	8%	$393,144

Calculations:

At 5%,

Coupon rate = Market rate. So, Issued price = Face value.i.e. $416,000

At 4%,

Quarterly interest rate = 4%/4 = 1%

Interest payment = $416,000 x 5% x (3/12) = $5,200

Present value of interest payment	$39,789
[$5,200 x 7.65168 Present value annuity of $1 at 1% for 8 periods]
Present value of face value	$384,168
[$416,000 x 0.92348 Present value of $1 at 1% for 8 periods]
Issue price of the bonds	$423,956

At 8%

Quarterly interest rate = 8%/4 = 2%

Present value of interest payment	$38,093
[$5,200 x 7.32548 Present value annuity of $1 at 2% for 8 periods]
Present value of face value	$355,052
[$416,000 x 0.85349 Present value of $1 at 2% for 8 periods]
Issue price of the bonds	$393,144

Answer 2

Maria has an annual contract with Morneau Insurance Company to provide property maintenance services; this includes lawn care, snow removal and parking lot maintenance. Maria spends, on average, 20 hours per week working at the company’s premises and is paid a flat amount monthly. She hires part-time workers, when necessary, to assist her. Maria does not have any other clients.

Maria uses her own small tools; however the company supplies and maintains a riding lawn mower and a snow plow for her use. Her contact at the company is Paul Lane, the Facilities Manager, who meets with her every Monday to discuss the work to be done that week. Paul approves Maria’s monthly invoices and submits them to Accounts Payable.

Does Maria have a contract of service or a contract for service with Morneau Insurance Company. As the company’s Payroll Manager, explain to Paul the process and factors you used to make your decision.

Answer 3

Contract of service

Answer 4

Contract of service