On March 1, 2020, Reed hired a contractor to construct a new office building. The construction work commenced on April 1, 2020, and it is expected to continue through July 31, 2022, the estimated completion date. Reed made progress payments to the contractor in 2020 as follows:

As stated in A5 above, Reed took a 1-year, 9%, $225,000 construction loan to help fund the work on this project. The company also has a 6-year, 5%, $559,165 loan that is not related to the construction project. Give the adjusting entry needed at December 31, 2020 to record the capitalization of interest for this project.

(A5)The Notes Payable balance of $784,165 results from two loans the company has taken. On September 1, 2019, Reed took a 6-year, 5%, $559,165 loan. The interest on this loan is payable annually, on each August 31. Also, on April 1, 2020, Reed took a 1-year, 9%, $225,000 construction loan (see A7 below). The interest on the construction loan is payable on the loan’s maturity date, March 31, 2021. (Note – Reed already recorded the interest paid on these loans in 2020. For this adjustment, consider any accrued interest on the loans at the December 31, 2020 reporting date.)

On January 1, 2018, Cameron Inc. bought 30% of the outstanding common stock of Lake Construction Company for $600 million cash. At the date of acquisition of the stock, Lake's net assets had a fair value of $800 million. Their book value was $700 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended December 31, 2018, was $300 million. During 2018, Lake declared and paid cash dividends of $20 million. The buildings have a remaining life of 5 years.

Required:
1. Complete the table below and prepare all appropriate journal entries related to the investment during 2018, assuming Cameron accounts for this investment by the equity method.
2. Determine the amounts to be reported by Cameron.

You are trying to decide whether to bid on a construction contract for a new bridge in South Carolina. You think that it will take 36 months to build and that construction costs will be $2 million per month. You expect tolls to be $10 million per year once the bridge opens, which will be offset by toll collection and maintenance costs of $2 million per year. Your (minimally acceptable rate of return) MARR is 15% per year. To bid on the project, you specify the price you are willing to pay to the state (in cash, at time 0) for the right to build the bridge and operate it for a period of 30 years. At the end of 30 years, the ownership and operation of the bridge revert to the state of South Carolina.

a. You can obtain a construction line of credit at 10% per year that can be used to cover all the construction expenses plus all of the accrued interest. What will be the outstanding balance when the bridge is completed?

b. Once the bridge is open, you will have a steady stream of income, so that you can refinance the construction loan at a lower interest rate, say 8% per year, and pay off the loan in 30 years. What will the annual payments be on this loan?

c. What is the cash flow (toll revenue minus payments on your loan) from operating the bridge worth to you at the end of month 30 when the bridge opens?

d. What are you willing to bid for the bridge?

An engineering firm with a good track record is known to have a 40% success rate in
getting state-government construction contracts. In a recent year, the firm submitted bids
on eight construction projects to be funded by the state-government. The bids for
different projects are assessed independently of each other.
i) CHOOSE which of these probability distributions is most appropriate to describe a random variable X defined as "the number of approved state-government construction contracts bid by the engineering firm in the recent year". *
X~Poisson(8)
X~Po(3.2)
X~Binomial(8,0.4)
X~Negative Binomial(8,0.4)
X~Geometric(0.4)
ii) Using the random variable X in question 1(i), which of the following mathematical expressions indicates: the probability that the engineering firm will not get any state-government construction contracts that they have bid in the recent year? *
P(X=8)
P(X > 1)
1 - P(X=0)
P(X is at most 0)
iii) Hence, which of the following answers is correct for the probability that the firm will not get any state-government construction contracts that they have bid in the recent year? *
0.0168
0.0408
0.6866
0.3134
0.9832
Y~Hypergeometric(8,2,5)
Y~Negative Binomial(2, 0.0408)
Y~Geometric(0.6)
Y~Binomial(8, 0.6)
Y~Negative Binomial(2, 0.0168)
Y~Negative Binomial(2, 0.6)

You recently returned from a trip to Berlin, Germany. You were there from April 1st to April 4th for a conference on World Tolerance. Before you left Abu Dhabi, on March 30th at 3:30pm, you called your bank, ADCB, and informed the bank that you were traveling and to ensure your credit card would not be blocked in Germany. The bank thanked you for the call, said the card would not be blocked and wished you a pleasant trip. Story About Your Trip in Berlin When you arrived in Berlin at 9am on April 1st, you got a taxi at the airport and took the taxi to the hotel. You paid 30euros for the trip with your credit card. Then you checked into the hotel at noon without problems because you booked and paid for the hotel online before your trip. At 1pm, you decided to go for a walk around Berlin before the conference started the next day. You saw a cute little tea-shop and decided to buy packages of tea for your family and friends. You took your packages to the counter and tried to pay. You were horrified to find out your credit card would not work. You have enough credit on your card and there shouldn’t be anything wrong. You are so embarrassed because you can’t pay for the tea and everyone in line is looking at you. On top of that, you now have 3 more days in Berlin and you can’t access money because your card is blocked. You run back to the hotel and call the bank. They confirm your card is blocked because you are in Germany. You explain that you called before your trip to make sure this would not happen. The bank said, “We are sorry for the inconvenience. There is nothing they can do at the time”. The bank said it would take 3-5 business days to fix the mistake, but that is too long. You are stuck in Berlin without any money. This means you have to take food from the hotel breakfast buffet and hide it in your room for dinner. You need to eat the snacks provided by the conference for your lunch. You must refuse invitations to lunch because you know you can’t pay. Also, you must ask someone at the conference for 10euros to take the subway back to the airport. You are absolutely humiliated. You couldn’t do anything in Berlin because you couldn’t access your credit card. You are so angry at the bank! Your trip was ruined. The only thing you could do in Berlin is to attend the conference and walk around the city and look at the stuff you couldn’t buy. You get home and decide to write a business letter to the customer service manager, Anke Kuse, at ADCB. The bank is in Abu Dhabi at the Airport Road Branch. The PO Box is 55567. You want the bank to refund your flight to Berlin and provide 5000aed in damages because their mistake ruined your trip. The total is 12400aed. This is your Abu Dhabi mailing address. You live in AlBateen in Villa #27 on 17th Street. Write your letter and submit both in the submission box (not comment box) and also upload the document.

You recently returned from a trip to Berlin, Germany. You were there from April 1st to April 4th for a conference on World Tolerance. Before you left Abu Dhabi, on March 30th at 3:30pm, you called your bank, ADCB, and informed the bank that you were traveling and to ensure your credit card would not be blocked in Germany. The bank thanked you for the call, said the card would not be blocked and wished you a pleasant trip.

Story About Your Trip in Berlin

When you arrived in Berlin at 9am on April 1st, you got a taxi at the airport and took the taxi to the hotel. You paid 30euros for the trip with your credit card.  Then you checked into the hotel at noon without problems because you booked and paid for the hotel online before your trip. At 1pm, you decided to go for a walk around Berlin before the conference started the next day.  You saw a cute little tea-shop and decided to buy packages of tea for your family and friends. You took your packages to the counter and tried to pay.  You were horrified to find out your credit card would not work.  You have enough credit on your card and there shouldn’t be anything wrong.  You are so embarrassed because you can’t pay for the tea and everyone in line is looking at you. On top of that, you now have 3 more days in Berlin and you can’t access money because your card is blocked.  

You run back to the hotel and call the bank. They confirm your card is blocked because you are in Germany. You explain that you called before your trip to make sure this would not happen. The bank said, “We are sorry for the inconvenience.  There is nothing they can do at the time”. The bank said it would take 3-5 business days to fix the mistake, but that is too long.  You are stuck in Berlin without any money.

This means you have to take food from the hotel breakfast buffet and hide it in your room for dinner. You need to eat the snacks provided by the conference for your lunch.  You must refuse invitations to lunch because you know you can’t pay. Also, you must ask someone at the conference for 10euros to take the subway back to the airport.  You are absolutely humiliated.  You couldn’t do anything in Berlin because you couldn’t access your credit card.  

You are so angry at the bank! Your trip was ruined.  The only thing you could do in Berlin is to attend the conference and walk around the city and look at the stuff you couldn’t buy. You get home and decide to write a business letter to the customer service manager, Anke Kuse, at ADCB.  The bank is in Abu Dhabi at the Airport Road Branch. The PO Box is 55567. You want the bank to refund your flight to Berlin and provide 5000aed in damages because their mistake ruined your trip. The total is 12400aed.  

This is your Abu Dhabi mailing address. You live in AlBateen in Villa #27 on 17th Street.

1. Income statement data for Winthrop Company for two recent years ended December 31, are as follows:

   	Current Year			Previous Year
   Sales	$799,100			$610,000
   Cost of goods sold	665,600			520,000
   Gross profit	$133,500			$90,000
   Selling expenses	$39,930			$33,000
   Administrative expenses	36,120			28,000
   Total operating expenses	$76,050			$61,000
   Income before income tax	$57,450			$29,000
   Income tax expenses	23,000			11,600
   Net income	$34,450			$17,400

   a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.

   Winthrop Company
   Comparative Income Statement
   For the Years Ended December 31
   	Current year Amount	Previous year Amount	Increase (Decrease) Amount	Increase (Decrease) Percent
   Sales	$799,100	$610,000	$	%
   Cost of goods sold	665,600	520,000		%
   Gross profit	$133,500	$90,000	$	%
   Selling expenses	$39,930	$33,000	$	%
   Administrative expenses	36,120	28,000		%
   Total operating expenses	$76,050	$61,000	$	%
   Income before income tax	$57,450	$29,000	$	%
   Income tax expense	23,000	11,600		%
   Net income	$34,450	$17,400	$	%

   b. The net income for Winthrop Company increased between years. This increase was the combined result of an   in sales and   percentage   in cost of goods sold. The cost of goods sold increased at a   rate than the increase in sales, thus causing the percentage increase in gross profit to be   than the percentage increase in sales.

Horizontal Analysis of the Income Statement

Income statement data for Boone Company for two recent years ended December 31, are as follows:

    Current Year     Previous Year
Sales $546,000 $420,000
Cost of goods sold 473,600 370,000
Gross profit $72,400 $50,000
Selling expenses $21,600 $18,000
Administrative expenses 19,200 15,000
Total operating expenses $40,800 $33,000
Income before income tax $31,600 $17,000
Income tax expenses 12,600 6,800
Net income $19,000 $10,200

a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.

Boone Company
Comparative Income Statement
For the Years Ended December 31
Current year Amount Previous year Amount Increase (Decrease) Amount Increase (Decrease) Percent
Sales $546,000 $420,000 $ %
Cost of goods sold 473,600 370,000 %
Gross profit $72,400 $50,000 $ %
Selling expenses 21,600 18,000 %
Administrative expenses 19,200 15,000 %
Total operating expenses $40,800 $33,000 $ %
Income before income tax $31,600 $17,000 $ %
Income tax expense 12,600 6,800 %
Net income $19,000 $10,200 $ %

b. The net income for Boone Company increased by 86.3% between years. This increase was the combined result of an   in sales of 30% and   percentage   in cost of goods sold. The cost of goods sold increased at a   rate than the increase in sales, thus causing the percentage increase in gross profit to be   than the percentage increase in sales.

Horizontal Analysis of the Income Statement

Income statement data for Winthrop Company for two recent years ended December 31, are as follows:

a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.

b. The net income for Winthrop Company increased between years. This increase was the combined result of an   in sales and  percentage   in cost of goods sold. The cost of goods sold increased at a   rate than the increase in sales, thus causing the percentage increase in gross profit to be   than the percentage increase in sales.

Horizontal Analysis of the Income Statement

Income statement data for Winthrop Company for two recent years ended December 31, are as follows:

a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.

b. The net income for Winthrop Company increased between years. This increase was the combined result of an   in sales and  percentage   in cost of goods sold. The cost of goods sold increased at a   rate than the increase in sales, thus causing the percentage increase in gross profit to be   than the percentage increase in sales.