Ayayai Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,160,000 on March 1, $1,440,000 on June 1, and $3,600,000 on December 31.

Ayayai Company borrowed $1,200,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 5-year, $2,400,000 note payable and an 11%, 4-year, $4,200,000 note payable. Compute avoidable interest for Ayayai Company. Use the weighted-average interest rate for interest capitalization purposes. (Round "Weighted-average interest rate" to 4 decimal places, e.g. 0.2152 and final answer to 0 decimal places, e.g. 5,275.)

PROCUREMENT METHOD

There are a number of different types of procurement routes available for clients to select. Each different type of procurement (Traditional, Design and Build, Construction Management, etc) has its own advocates and inherent strengths and weaknesses. Describe in detail the most suitable procurement to be used based on the scenario below.

The explanation shall include the definition of the suitable type of procurement method, its characteristic, and the reason for selection. You may use figures to explain it.

CASE 9‐4 Self‐Constructed Assets

Jay Manufacturing, Inc., began operations five years ago producing the probo, a new type of instrument it hoped to sell to doctors, dentists, and hospitals. The demand forprobos far exceeded initial expectations, and the company was unable to produce enough probos to meet that demand. Jay was manufacturing probos on equipment it built at the start of its operations, but it needed more efficient equipment to meet demand. Company management decided to design and build the equipment because no equipment currently available on the market was suitable for producing probos.

In 2017, a section of the plant was devoted to development of the new equipment and a special staff of personnel was hired. Within six months, a machine was developed at a cost of $170,000 that increased production and reduced labor cost substantially. Sparked by the success of the new machine, the company built three more machines of the same type at a cost of $80,000 each.

Required:

1. In addition to satisfying a need that outsiders cannot meet within the desired time, what other reasons might cause a firm to construct fixed assets for its own use?
2. In general, what costs should be capitalized for a self‐constructed asset?
3. Discuss the appropriateness (give pros and cons) of including these charges in the capitalized cost of self‐constructed assets:
   1. The increase in overhead caused by the self‐construction of fixed assets
   2. A proportionate share of overhead on the same basis as that applied to goods manufactured for sale (consider whether the company is at full capacity)
4. Discuss the proper accounting treatment of the $90,000 ($170,000 – $80,000) by which the cost of the first machine exceeded the cost of the subsequent machines.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

It is desired to develop a statistical acceptance procedure based on variables for the percentage compaction of stabilized base-course layers. From a historical summary of data, the standard deviation of the percentage of compaction is known to be 3.31%. The mean value of percentage of compaction, for successfully performing layers, from the contractor point of view is 99.0%. It has been agreed that the probability for rejecting a base course whose mean percentage of compaction is 99.0% should be 2% or less. However, when the true mean value of the percentage of compaction of the stabilized course is 93.5%, the agency would like to only have a risk of 5% associated with acceptance. Based on this information, determine the number of sampling units “n” along the rejection-acceptance mean value “L” that would constitute the statistical quality assurance specification for the percentage of compaction of base layers. The specification defined above was applied to the base of a section of highway, the random sample of size “n” was tested and the average percentage of compaction obtained was 96.75%. Should the base of the section of highway be accepted or rejected?

An institute reported that

68% of its members indicate that lack of ethical culture within financial firms has contributed most to the lack of trust in the financial industry. Suppose that you select a sample of 100 institute members. Complete parts ​(a) through ​(d) below.

a. What is the probability that the sample percentage indicating that lack of ethical culture within financial firms has contributed the most to the lack of trust in the financial industry will be between

66

and 72​%?

0.4704

​(Type an integer or decimal rounded to four decimal places as​ needed.)

b. The probability is 70

that the sample percentage will be contained within what symmetrical limits of the population​ percentage?The probability is 70% that the sample percentage will be contained above 63​%

and below 73%

​(Type integers or decimals rounded to one decimal place as​ needed.)

c. The probability is

97% that the sample percentage will be contained within what symmetrical limits of the population​ percentage? The probability is 97% that the sample percentage will be contained above nothing​% and below nothing​%.

What's the answer to C

Saint Mary’s University jointly runs a dual degree program with the Beijing Normal University at Zhuhai. In order to do so, Saint Mary’s provides faculty to instruct in China. For the spring session scheduled to run from April 22^nd to May 31^st, 2019 Saint Mary’s had an individual prepared to instruct this course. This person entered into a contract with SMU which stated in part that the individual would instruct in China during the entirety of the spring session, but said nothing about cancellation by either party. At some point on or about late February, this individual advised Saint Mary’s that they would not be able to come to Zhuhai. Assume for the purposes of this assignment that the individual had been diagnosed with cancer, and was unable to travel.

In or about early March Professor Scott had been offered and had accepted a position as the new instructor by Saint Mary’s. A contract was entered into that included, among other things, clear instructions that he would need to secure the appropriate Visa that would allow him to travel to Zhuhai. As time was tight (in legal terms we say that time was of the essence) Scott was encouraged to go ahead and book flights and make the necessary arrangements in order to be in China to start classes on April 22.

In Canada, the Chinese embassy is responsible for issuing appropriate Visas for travel to China. In order to facilitate the processing of applications, the embassy utilizes an independent company known as the Chinese Visa Processing Centre Limited…this company is a separate entity from the government and operates at arm’s length from the embassy. Applications are filled out online, and when complete, the applicant must print the application form and attend in person at the offices of the Chinese Visa Processing Centre where they pay a fee and also provide biometric scans that enable the embassy to conduct their work. The Chinese Visa Processing Centre essentially pre screens visa applications to ensure conformity with the established decision parameters. If there are readily apparent issues, for example an expired passport or things of an administrative nature, then the Chinese Visa Processing Centre will hold an application pending the correction of the issue by the applicant. The Processing Centre also states that applicants who cannot pick up their passport in person must provide a prepaid pre-addressed return envelope so that the passport containing the Visa can be returned to the applicant.

Scott prepared the online application form as advised. Given the type of Visa required, Scott needed a letter, known as the Foreign Expert Invitation Letter issued by the provincial government in Guangdong, China. Although this letter was not mentioned in the contract, Saint Mary’s represented verbally that they would secure the letter for Scott. Saint Mary’s did, in fact secure the letter, which was advanced to Scott via email on March 19. Having completed the application, and with the letter in hand, Scott flew to Ottawa to deliver the visa application.

Before that however, Scott had booked flights from Halifax to Zhuhai that would have him arrive in China on April 19 in time to begin classes on the 22^nd. Scott was instructed to secure cancellation insurance on all flights. Scott did, in fact, pay for and receive a policy of insurance that clearly stated that it would cover the cost of flights cancelled due to medical emergencies or death, including medical emergencies or death to immediate family members of the insured party.

While sitting in the departure lounge awaiting his return flight to Halifax, having attended at the Visa Processing Centre as required Scott received a telephone call from the Chinese Visa Processing Centre and was told that the embassy has already had a look at the Foreign Expert Invitation Letter. Scott was advised that the letter would not suffice because it lacked certain information, and also because it needed to be issued by the appropriate government authorities in the Guangdong Province. The letter had actually been issued by the University, in accordance with past practice This issue had not been raised for previous applications.

As a result of this problem, it became impossible to travel as planned and Scott advised his travel agent that the flights would need to be cancelled or changed. Further, Scott and officials at Saint Mary’s decided that he should not rebook any travel until it was absolutely certain that the new letter could be obtained.

On April 19, Scott received a different Foreign Expert Invitation Letter and forwarded it to the Chinese Visa Processing Centre. They acknowledged receipt on April 22 and indicated that he should receive confirmation that the Visa had been processed by April 26.

With this new knowledge, Saint Mary’s and Beijing Normal University at Zhuhai amended the start date of the course to May 6.

On April 26, Scott received word that his Visa had been processed and his passport had been placed in the provided pre-paid, pre-addressed envelope and put in the mail. The expected delivery date was April 29. Unfortunately, on April 29 it was discovered that the passport had been delivered to any entirely different address, not in Halifax Nova Scotia, but in Mississauga Ontario, 2000 kilometres away. The address label on the envelope that had been purchased from Canada Post had been tampered with before it was sold. When it was placed in the postal system by the Chinese Visa Processing Centre, it had two different addresses, and Canada Post picked one but they picked the wrong one. When contacted by Scott, Canada Post officials advised that once the envelope had been placed in the mailbox of the receiver, it became the receiver’s property, and Canada Post could not recover it because this would constitute theft. They took no responsibility for the envelope, saying it was the buyer’s problem.

Fortunately the passport was located. The individual that had the passport said that he would return it if Scott came to get it at his home. When Scott travelled to the home, the gentleman said he would only return it if Scott paid a significant reward. At first Scott declined, but the gentleman indicated that he would call the police and state that Scott was trespassing on his property. Scott felt he had no choice, and so he complied and made the payment.

When Scott returned to his hotel with the passport, the rain started to fall heavily. The stone walkway at the front of the hotel was quite slippery, and unfortunately Scott fell and injured his shoulder. Hotel staff would take no responsibility for the injury, stating Scott should have been more careful as it was raining. A sign on the wall of the hotel indicated that the paving stones could become slippery when wet, and patrons of the hotel were cautioned that the hotel accepted no responsibility for injuries. Unfortunately, the hotel concierge had left a luggage cart in front of the sign such that it was not visible.

1. IDENTIFY ALL THE POTENTIAL LEGAL ISSUES WITH REFERENCE TO THE MATERIALS COVERED IN THE COURSE. YOU MAY PREPARE YOUR ANSWER IN POINT FORM. NOTE ALSO THAT YOU ARE ASKED ONLY TO IDENTIFY THE POTENTIAL LEGAL ISSUES, SO A COMPLETE ANALYSIS IS NOT REQUIRED. (50 points)

2. ASSUME YOU ARE A LAWYER RETAINED BY SAINT MARY’S. ADVISE SAINT MARY’S OF ALL OF THEIR RIGHTS AND OBLIGATIONS IF SCOTT HAD NOT BEEN ABLE TO SECURE THE VISA. (10 points)

3. IDENTIFY, WITH REFERENCE TO RISK MANAGEMENT STRATEGIES, AREAS WHERE RISK WAS ENCOUNTERED AND HOW THE PARTIES DEALT WITH THE RISK. SPECIFY THE PARTICULAR RISK MANAGEMENT STRATEGY. (35 points)

4. WOULD IT MAKE ANY DIFFERENCE TO YOUR ANALYSIS IF SCOTT WAS PAID OR IF HE WAS A VOLUNTEER? WHY OR WHY NOT? (5 points)

Required information

Exercise 5A-2 Least-Squares Regression [LO5-11]

[The following information applies to the questions displayed below.]

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of it car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Exercise 5A-2 Part 2

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars.

Lexington Company produces baseball bats and cricket paddles. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process.

Beginning work in process in the finishing department was 80% complete as to conversion. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows:

Calculate the Cost per equivalent unit for the Finishing department, for Direct Materials,
Convesion Costs and Transferred in costs, using the FIFO method

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.70 Electricity $ 1,400 $ 0.08 Maintenance $ 0.15 Wages and salaries $ 4,300 $ 0.40 Depreciation $ 8,300 Rent $ 2,200 Administrative expenses $ 1,700 $ 0.04 For example, electricity costs are $1,400 per month plus $0.08 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.80 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,500 Revenue $ 59,220 Expenses: Cleaning supplies 6,380 Electricity 2,042 Maintenance 1,500 Wages and salaries 8,020 Depreciation 8,300 Rent 2,400 Administrative expenses 1,936 Total expense 30,578 Net operating income $ 28,642 Required: Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)