On June 1, 2020, the Crocus Company began construction of a new manufacturing plant. The plant was completed on October 31, 2021. Expenditures on the project were as follows ($ in millions):

On July 1, 2020, Crocus obtained a $70 million construction loan with a 6% interest rate. The loan was outstanding through the end of October, 2021. The company's only other interest-bearing debt was a long-term note for $100 million with an interest rate of 8%. This note was outstanding during all of 2020 and 2021. The company's fiscal year-end is December 31.

What is the amount of interest that Crocus should capitalize in 2021, using the specific interest method? (Enter your answers to nearest whole dollar amount.)

$7,283,000.

$7,117,000

$8,740,000.

$7,248,000.

On December 31, 2019, Cheyenne Inc. borrowed $3,960,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $475,200; June 1, $792,000; July 1, $1,980,000; December 1, $1,980,000. The building was completed in February 2021. Additional information is provided as follows.

Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building

Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2020.

For its first year if operations, Altitude Inc. reports pretax GAAP income of $100,000 in 2020. Assume pretax income in 2021 and 2022 of $125,000 and $90,000 respectively. The enacted income tax rate in all years is 25%. The following additional information is available for the first three years of operation (with the exception of the one item in the 4th year).

• Prepaid rent in the amount of $20,000 was recorded on December 21, 2020 for 2021 rent.
• A warranty accrual of 30,000 was recorded on December 31, 2020. The warranty was paid evenly over the years 2021-2023.
• The company recorded interest revenue of $500 each of the three years on municipal bonds.

1. Compute the income tax payable each year for 202, 2021, 2022
2. Determined the balance of any deferred tax assets or deferred tax liabilities at the end of each year (2020, 2021, 2022)
3. Record the journal entry related to taxes in 2020, 2021, 20222

P12.4 Monsecours Corp., a public company incorporated on June 28, 2019, set up a single account for all of its intangible assets. The following summary discloses the debit entries that were recorded during 2019 and 2020 in that account:

The new business started up on July 2, 2019. No amortization was recorded for 2019 or 2020. The goodwill purchased on April 1, 2020, includes in-process development costs that meet the six development stage criteria, valued at $175,000. The company estimates that this amount will help it generate revenues over a 10-year period.

Instructions

a. Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as at December 31, 2020, and record any necessary amortization so that all balances are appropriate as at that date. State any assumptions that you need to make to support your entries.

b.  In what circumstances should goodwill be recognized? From the perspective of an investor, does the required recognition and measurement of goodwill provide useful financial statement information?

Question 3 Part A XYZ Windows Ltd is involved in a research and development project to create a filtering window that removes the need for curtains. For the current year ended 30 June 2020 expenditure on the project is as follows: Research $235,000 Development $500,000 The window is expected to return profits of $70,000 per year for the 10 years commencing 1 July 2020. Assuming the company uses a straight-line method amortisation. This company uses a discount rate of 8 per cent. Required: i) How much research and development cost should be expensed in the year to 30 June 2020? ii) How much development expenditure should be amortised in the year to 30 June 2021?

Part B An assistant of yours has encountered the following matter during the preparation of the draft financial statements of XYZ Ltd for the year ending 30 June 2020. He /She has given an explanation of his/her treatment of the item. “XYZ Ltd management spent $200,000 sending its staff on training courses during the year. This has already led to an improvement in the company’s efficiency and resulted in cost savings. The organiser of the course has stated that the benefits from the training should last for a minimum of four years. The assistant has therefore treated the cost of the training as an intangible asset and charged six months’ amortisation based on the average date during the year on which the training courses were completed.” Required: Comment on the assistant’s treatment of them in the financial statement for the year ended 30 June 2020 and advise him how they should be treated under AASB 138 Intangible Assets.

Part C If an organisation is constructing a building, and that building will take a number of years to complete, can the organisation recognise revenue throughout the contract, or does the construction-based organisation have to wait until project completion before it recognises the revenue associated with the construction contract? Discuss this statement in accordance to AASB 15.

Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The cost of new machinery for the new product line would be $644,000. The machinery has economic life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the machine. The new line would generate incremental sales of 70,000 units per year at variable cost per unit of $21 and fixed cost of $725,000 per year. Each unit can be sold for $37 in the first year. The sale price and cost are both expected to remain the same. The firm’s tax rate is 35 percent, and the rate of return required for this type of investment is 15 percent. Calculate the base-case cash flow and NPV.

(1)A US based MNC plans to invest in a new project EITHER in US or in Mexico. The new project is expected to take up a quarter of the firm’s total investment fund. The balance of the corporation’s investment is exclusively in an existing US project. The features of the proposed new project are as follows:

                                                          Existing US project US project (new) Mexico project (new)

Expected rate of return E(R) 10% 15% 15%

Standard deviation of E(R) 0.10 0.11 0.12

Correlation of returns from new

project with returns on existing

US project - 0.95 - 0.05

Based on considerations of risk and return, determine the portfolio the MNC should choose if the goal is to generate more stable returns.

After graduating from Yorkville University with a BBA you are making a good salary and now want to begin investing. You are analyzing two Canadian Banks as investment options. Bank of Nova Scotia (BNS) and Bank of Montreal (BMO). The stock price of BNS is current $65. The price of BNS next year will be $53 if the economy is in a recession, $73 if the economy is normal, and $85 if the economy is expanding. The likelihood of recession, normal or expansion are 0.2, 0.6 and 0.2. respectively. BNS had suspended their dividend due to the pandemic crisis and has a beta of 0.68.   BMO has continued to pay its dividends and has an expected return of 13%, a standard deviation of 34%, a beta of 0.45, and a correlation with BNS of 0.48. The market portfolio has a standard deviation of 14%.
a) Assuming that the CAPM holds, what is the expected return and standard deviation of BNS?
After careful analysis you decide to invest 60% of your portfolio in BNS and 40% in BMO.
What are the ;
b) expected return
c) standard deviation
d) beta of this portfolio?

You receive a brochure from a large university. The brochure indicates that the mean class size for​ full-time faculty is fewer than 33 students. You want to test this claim. You randomly select 18 classes taught by​ full-time faculty and determine the class size of each. The results are shown in the table below. At alphaequals0.10​, can you support the​ university's claim? Complete parts​ (a) through​ (d) below. Assume the population is normally distributed. 38 29 27 35 35 37 26 22 29 25 32 36 34 30 29 33 26 26

​(a) Write the claim mathematically and identify Upper H 0 and Upper H Subscript a. Which of the following correctly states Upper H 0 and Upper H Subscript a​? A. Upper H 0​: muequals33 Upper H Subscript a​: munot equals33 B. Upper H 0​: mugreater than33 Upper H Subscript a​: muless than or equals33 C. Upper H 0​: mugreater than or equals33 Upper H Subscript a​: muless than33 D. Upper H 0​: muequals33 Upper H Subscript a​: muless than33 E. Upper H 0​: muless than33 Upper H Subscript a​: mugreater than or equals33 F. Upper H 0​: muless than or equals33 Upper H Subscript a​: mugreater than33

​(b) Use technology to find the​ P-value. Pequals nothing ​(Round to three decimal places as​ needed.) ​

(c) Decide whether to reject or fail to reject the null hypothesis. Which of the following is​ correct? A. Fail to reject Upper H 0 because the​ P-value is greater than the significance level. B. Reject Upper H 0 because the​ P-value is less than the significance level. C. Fail to reject Upper H 0 because the​ P-value is less than the significance level. D. Reject Upper H 0 because the​ P-value is greater than the significance level. ​

(d) Interpret the decision in the context of the original claim. A. At the 10​% level of​ significance, there is not sufficient evidence to support the claim that the mean class size for​ full-time faculty is more than 33 students. B. At the 10​% level of​ significance, there is sufficient evidence to support the claim that the mean class size for​ full-time faculty is fewer than 33 students. C. At the 10​% level of​ significance, there is sufficient evidence to support the claim that the mean class size for​ full-time faculty is more than 33 students. D. At the 10​% level of​ significance, there is not sufficient evidence to support the claim that the mean class size for​ full-time faculty is fewer than 33 students. Click to select your answer(s).

A NEW MOBILE “APP” FOR A MUSIC COMMUNITY

Following his graduation from an excellent university with a degree in music and entrepreneurship, Brian Wright was eager to launch a music-related business. Brian always enjoyed working with new technologies as well as listening to music. Because of the proliferation of social media sites on the Internet and the advances in mobile technologies with smartphones, he believed that developing an “app” for mobile phones that brings together a community of fans for their favorite music would be ideal. The development of mobile applications has become one of the largest industries of mobile technologies and hundreds of thousands of apps exist for mobile users in almost every category: games, lifestyle, social networking, education, business, etc. In the Apple App Store alone are more than 500,000 apps and counting; many are even free, but many others are not, which means mobile applications are truly a growing source of business.

Brian was confident that the success of the other open sourced communities and other mobile apps proved that there was a market for his idea; therefore, developing an app for personal music would be an easy concept for customers to grasp. Although music can be downloaded for free or for small fees, Brian knew that he and his friends preferred to listen to an particular music and then comment about it. Brian believed that any true fan of a particular brand of music would want to engage with other like-minded individuals. And, if it was available on a smartphone as an app, then the mobility issue would ensure its success.

When calculating potential revenue, Brian concluded that the best way to monetize the app would be through a reasonable purchase price and then have music related companies pay for ads that run within the app. Since he was creating new social community around music, this would certainly be an avenue for companies to advertise. As Brian began discussing his idea with his friends, their enthusiasm convinced him that he needed to act quickly before someone else seized the opportunity. At $2 per app purchase and an estimated four new community members per month, he would only need a little over 20,000 customers to reach $1,000,000 in annual revenue. After looking at his financial forecasts, Brian decided that it was time to bring his mobile music app to market.

QUESTIONS

1.      Has Brian completed the proper marketing research for this potential opportunity? Why or why not? Explain.

2.      Based on the case, are there key mistakes that you would caution Brian about? Explain.

3.      What specific steps would you recommend to Brian for him to better assess this opportunity?