On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019.

Expenditures on the project were as follows:

On January 1, 2018, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 6% and 8%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.

Required:
1. Calculate the amount of interest that Mason should capitalize in 2018 and 2019 using the specific interest method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that will appear in the 2018 and 2019 income statements.

Req 1 and 3

Req 2

A sample of 65 video game satisfaction ratings are given in the following table:

The mean and the standard deviation of the sample of 65 video game satisfaction ratings are x⎯⎯x¯= 41.45 and s = 2.2011.

(a) What does the histogram in Figure 2.15 say about whether the Empirical Rule should be used to describe the satisfaction ratings?

It (Click to select)is notis somewhat reasonable.

(b) Use the Empirical Rule to calculate estimates of tolerance intervals containing 68.26 percent, 95.44 percent, and 99.73 percent of all possible satisfaction ratings. (Round your answers to 4 decimal places.)

(c) Does the estimate of a tolerance interval containing 99.73 percent of all satisfaction ratings provide evidence that 99.73 percent of all customers will give a satisfaction rating for the XYZ-Box game system that is at least 34 (the minimal rating of a “satisfied” customer)? Explain your answer.

(Click to select)NoYes, because the lower limit of the interval is (Click to select)greater thanequal toless than 34.

(d) How do the percentages of the 65 customer satisfaction ratings in that actually fall into the intervals [x⎯⎯x¯ ± s], [x⎯⎯x¯ ± 2s], and [x⎯⎯x¯ ± 3s] compare to those given by the Empirical Rule? Do these comparisons indicate that the statistical inferences you made in parts b and c are reasonably valid? (Round your answers to the nearest whole number. Omit the "%" sign in your response.)

Based on Contract Law: 10 Marks Superstrong Petroleum Products SAOC Wholesalers of petroleum & petroleum products, including racing fuels, oils & lubricants & specialty chemicals were the regular suppliers oils and lubricants to SafePackaging LLC, a manufacturer of duplex cartons operating from the Rusayl Industrial Estate. The two companies had been dealing with each other since 1996 on an informal basis with no written contract. In January 2018, the parties agreed that it would be wise to have a formal contract written. Accordingly, Superstrong Petroleum Products SAOC drew up a draft contract and sent it to the SafePackaging LLC. SafePackaging LLC made some minor amendments and filled in some blanks and sent it back to Superstrong Petroleum Products SAOC. Superstrong then simply filed the document and never communicated their acceptance to the contract. Throughout this period the claimants continued to supply the coal. Subsequently a dispute arose in December 2019. Safepackaging refused to settle an invoice amounting to OMR 65,000 claiming that the Superstrong had charged more than the contracted price. They also claimed that there was no contract between the parties.

You are required to advise Superstrong on the validity of the written agreement between the two parties.

I: Based on the Taxation Law of Oman: 10 marks “Traditionally, double tax treaties (DTTs) served as an important policy tool to promote international economic activity by preventing international double 6 taxations. However, despite the growing number of contributions, the empirical evidence on the effects of double tax treaties on bilateral FDI remains inconclusive.” With reference to the above statement critically evaluate the significance of double tax treaties (double taxation avoidance agreements) to developing countries.

The national average for non-mortgage debt is $31,531 in Canada with a standard deviation of $5,215. The average non-mortgage debt in a randomly selected sample of 60 Kingston residents is $29,132. Do Kingstonians have lower non-mortgage debt levels than the rest of the country?

Just like the balance sheet distinguishes current assets from non-current ones, it also reports current and non-current liabilities?

What is the difference between these two categories?

Why do we distinguish current items from non-current ones?

Question 5 : In accordance with HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, discuss the procedures in selecting, applying and changing the accounting policies for the listed companies in Hong Kong.

Question 6: In accordance with HKAS 10 Events after the Reporting Period, what is the core principle? What are adjusting events and non-adjusting events? Discuss with examples.

Question 7 : In accordance with HKAS 23 Borrowing Costs, what is the core principle? What are the accounting treatments of borrowing costs eligible for capitalisation? What are the criteria to start measuring for capitalisation?

Question 8 : In accordance with HKAS 38 Intangible Assets, discuss the criteria for development costs to qualify for recognition as intangible assets.

Question 9 : Most preparers and users of financial statements recognize that there is a need for a formal conceptual framework in financial reporting. Therefore, there is a formal conceptual framework for accounting, accounting practice and accounting standards are based on this framework can benefit different stakeholders.

REQUIRED:

Discuss the purposes of the IASB/HKICPA Conceptual Framework for Financial Reporting 2018.

The Child Tax Credit prior to 2018 provided a subsidy to families with children and was part of the US Federal Income Tax code. For married couples filing jointly, the credit was $1000 for each eligible child and was phased out at the rate of 5% for income above $110,000. For a family with four children and no other non-wage income besides the credit, answer the following questions. Assume no other taxes/subsidies.

A) Draw the annual budget constraint with and without the tax credit program, assuming that full income is $300,000/year.

B) Calculate the breakeven level of earnings under the program.

C) Using indifference curve analysis, describe how the program would likely affect a person's labor supply if the person's earnings in absence of the program were less than $110,000. Explain.

D)  Using indifference curve analysis, describe how the program would likely affect a person's labor supply if the person's earnings in absence of the program were less than $150,000.

Jayhawk Company leased a machine from Houston Leasing. The machine had a 5 year life. The lease was for three years and required three payments of $200,000 each made at the beginning of the year starting with January 1, 2017. The lease was non-cancellable, and title did not pass at the end of the lease. There was no bargain purchase right either. However, the present value of the minimum lease payments was greater than 90% of the fair value on January 1, 2017. The cost of the leased equipment to Houston was $450,000. Houston’s earning’s rate is 8%, and there is a guaranteed residual value of $20,000 at the end of year 3. The actual value at the end of year 3 was $15,000. Houston considers this lease a sale type lease.

On the books of Houston,

Prepare an amortization schedule of the lease receivable.

Record the inception of the lease on January 1, 2017 and the receipt of the first payment.

Record the last receipt from the lease and the return of the equipment.

Assume the lease was cancellable. Record the receipt of the second payment on January 1, 2018.

CASE STUDY 1: Lloyds Banking Group Monetary Policy Committee
You are a voting member of Lloyds Banking Group Monetary Policy Committee (MPC) and are expected to make a policy decision at the next MPC meeting in January 2021. The current Repo rate is 4.25% and the allowable inflation target ranges between 3% to 5%. The Research department has presented the following global and domestic market update for your consideration.
Key extracts of the presentation are summarized below:
Extract 1: Global update
According to the IMF’s World Economic Outlook (WEO) for October 2020, the global economy is expected to recover substantially in 2021 following the negative effects of COVID-19. The impact of COVID-19 outbreak has lessened significantly since the first cases were made public at the beginning of the year 2020. To curb the spread of the pandemic, governments worldwide imposed severe restrictions and lockdown measures, subsequently bringing economic activities to a virtual standstill in the process. According to the latest WEO, the global economy is now projected to recover and grow by 3.8 percent in 2021, which is an upward revision from a 2.3 percent growth published in the WEO update for January 2021. The upward revision is on the back of successful easing of lockdown restrictions and resumption of economic activities in both advanced and emerging market economies. The global output is then projected to expand by 5.8 percent in 2021.
Extract 2: Emerging market update
Emerging market and developing economies (EMDEs) improved moderately in the second half of 2020 and are expected to recover strongly in 2021. Overall, EMDEs are projected to grow by 2.0 percent in 2020, before recovering to a strong growth of 6.6 percent in 2021. Going forward EMDEs are expected to experience a sharp recovery in 2021 once the adverse effects from this economic shock subside.
Extract 3: Domestic market update
1.   Domestic growth remained positive during the last quarter of 2020, supported by construction, wholesale and retail trade, as well as the communication sectors. In contrast, activities such as livestock farming and uranium mining performed weakly.
2.   Going forward, the domestic economy is forecasted to improve in the remainder of 2021, also supported by construction activities, as well as strong growth in demand. Declining international commodity prices remain a concern, as it may negatively affect mineral production.
3.   Inflation has shown an upward trend for the past five months. Annual inflation rose from 4.9 percent in June 2020 to 6.1 percent in January 2021, mainly due to increases in food and transport prices. As a result, this recent trend of inflation is expected to average around 7 percent for the year.
4.   The annual growth rate in domestic private sector credit increased steadily to 17.8 percent in December 2020, compared to 14.3 percent in December 2019. Growth in private sector credit resulted from higher demand by both individuals and businesses. The rise in household debt largely reflected strong growth in unproductive instalment credit and overdraft loans which remains a concern for the MPC.
5.   During the last quarter of 2020, the trade deficit increased significantly. A rapid growth in imports of vehicles, partly financed by instalment credit, remains a concern. The total number of vehicles sold during the last four months of 2020 increased by more than 50 percent, compared to the same period in 2019. The value of imported vehicles amounted to N$2.2 billion, which is a significant amount in relation to the total import bill of goods of N$15.9 billion. Unproductive imports have put pressure on international reserves of the country and require monitoring.

Extract 4: Key domestic sector updates
Construction Sector update:
The contraction in the construction sector is expected to deepen during 2020 as projects anticipated to kickstart earlier are likely to be delayed. The construction sector is expected to contract by 16.3 percent and 1.5 percent in 2020 and 2021, respectively. The deeper contraction for 2020 is based on expectations that some of major projects, which were expected to commence in 2020 are likely to be delayed, mainly due to COVID-19 induced travel restrictions. This assertion is supported by the recent directive by the Minister of Finance to SOEs and Government Ministry to suspend capital projects until further notice.
Uranium Sector update
Uranium mining is similarly projected to contract during 2020, followed by a mild recovery in 2021. The uranium mining sector is expected to contract by 22.4 percent in 2020, before expanding by 4.6 percent in 2021. The sector is first and foremost grappling existing factors that include insufficient supply of water required for their operations and persistently low uranium prices, viewed together with the reduction in long-term supply contracts. This means that uranium mines are more exposed to spot prices, which squeezes their margins. There is, however, an indication that COVID-19 and resulting travel restriction have not prevented the mines from exporting their output thus far and it may not constitute a major factor in the foreseeable future. The volumes produced during the first three months of 2020, were 26.4 percent lower than the production for the corresponding three months of 2019, making any prospects to catch up with 2019 production levels unlikely.

CASE STUDY 1 QUESTIONS
1.   Based on Extracts 1-3 in the case facts presented above, Recommend the monetary policy stance and decision that Lloyds Banking Group should take and Justify your recommendation with three (3) reasons found in Case study 1 above

Justification should include specific facts related to the case study!!!

2.   Based on Extract 4 above, Identify one reason for the expected contraction in the construction sector and two reasons for expected contraction in the Uranium sector