Lobo, Inc., a construction contractor, has asked for your advice on the following:

New City filed suit against Lobo at the end of 2018 seeking $10 million in civil penalties and injunctive relief based upon violation of the New City construction code pertaining to green building standards.   New City alleged that Lobo had violated the code in various projects undertaken over the past two years. At the end of 2019, the parties had engaged in discovery and begun settlement negotiations. Lobo offered to settle for $500,000. New City rejected this amount and countered with $6 million. Lobo's attorney advised that the ultimate settlement would probably be $3.5 to $5 million based on the information learned in discovery, the settlement negotiations thus far, and the risk and expense of a lengthy trial. Lobo's attorney explained that no amount within that range was better estimate than any other amount. New City follows U.S. GAAP.

Required:

1. What amount (if any) did Lobo make at the end of 2019 (make the entry) to accrue a loss?   Why (what conditions must be satisfied for such an accrual)? Was any disclosure required? If so, be specific as to any amounts that should be disclosed and feel free to draft the disclosure note. (You also must cite the applicable provisions of the ASC).

2. Now assume that Lobo properly made an accrual as a litigation loss of $4.3 million in 2019. In late-2020, Lobo entered into a full settlement with the City for a total of $2 million to cover the cost of the violation. What journal entry (if any) should Lobo make at the end of 2020? Why? Hint: What kind of change is this?

Based on Problem 10-6

Indigo Landscaping began construction of a new plant on December 1, 2020. On this date, the company purchased a parcel of land for $147,600 in cash. In addition, it paid $3,120 in surveying costs and $4,080 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,120, with $960 being received from the sale of materials.

Architectural plans were also formalized on December 1, 2020, when the architect was paid $34,800. The necessary building permits costing $3,120 were obtained from the city and paid for on December 1 as well. The excavation work began during the first week in December with payments made to the contractor in 2021 as follows.

Compute the balance in each of the following accounts at December 31, 2020, and December 31, 2021.

To finance construction of this plant, Indigo borrowed $602,400 from the bank on December 1, 2020. Indigo had no other borrowings. The $602,400 was a 10-year loan bearing interest at 9%.

The building was completed on July 1, 2021.

Using Excel calculate the following (show your work and use formulas where appropriate):

1. Balance in the Land account for December 31, 2020 and December 31, 2021
2. The weighted average of accumulated expenditures for 2020
3. The amount of interest capitalized in 2020
4. The weighted average of accumulated expenditures for 2021
5. The amount of interest capitalized in 2021
6. Balance in the Building account for December 31, 2020 and December 31, 2021
7. Balance in the Interest Expense account for December 31, 2020 and December 31, 2021

An electric utility company is considering construction of a new power facility in Albuquerque, New Mexico. Construction of the plant would cost $275 millioneach year for five years. Expected annual net cash flows are $85 million each year for five years.

Power from the facility would be sold in the Albuquerque and Santa Fe areas, where it is badly needed. The firm has received a permit, so the plant would be legal as currently proposed, but air pollution would be an issue with the new facility.

To alleviate the environmental concerns the company could spend an additional $50 millionwhen the plant is built. The additional funds cover the costs of special equipment designed to minimize the air pollution. At this time, the special pollution-abatement equipment is not required by law. If the firm adds the environmental protections to the facility, the expected annual net cash flows are $90 million for five years.

Unemployment rates are high in the area Where the plant would be built. The plant would provide about 500 new, well-paying jobs.

The risk-adjusted WACC for this project is 15%. As an employee of the utility company, you have been tasked with analyzing the project. You are to make your recommendations to the company’s Board of Directors in a memo.

1. Calculate the NPV, IRR and regular Payback period for this project (with and without the environmental protection equipment).
2. What is your recommendation for the utility company? Provide support for your responses.
3. What additional qualitative/quantitative factors should be considered in accepting or rejecting both versions of this project? The factors might include job creation, salvage value, project life, discount rate (WACC) etc.

On July 31, 2017, Wildhorse Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Wildhorse issued a $328,800, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $232,800 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Wildhorse made a final $96,000 payment to Minsk. Other than the note to Netherlands, Wildhorse’s only outstanding liability at December 31, 2017, is a $28,600, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017. Interest revenue $ Weighted-average accumulated expenditures $ Avoidable interest $ Interest capitalized $ Prepare the journal entries needed on the books of Wildhorse Company at each of the following dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) July 31, 2017. (2) November 1, 2017. (3) December 31, 2017. Date Account Titles and Explanation Debit Credit (To record the note.) (To record the payment to Minsk.) (To record the proceeds from the investment.) (To record the payment to Minsk.) 12/31 Click if you would like to Show Work for this question: Open Show Work

Eric and Pat are baseball fans. They drove to the local stadium in Eric's car to watch a game, and decided to park in the parking garage. When driving into the parking garage, they were required to take a ticket in order to get access to the garage. The cost for parking the car was $15.00, which was not due until exiting the garage. After taking the ticket, they parked the car and then walked across the street to the game. When the game was over, they walked back to the car. Upon approaching Eric's vehicle, they noticed that one of the windows had been smashed in. Everything inside had been taken, including Pat's work laptop which had been sitting in a bag in the backseat of the car. Eric and Pat were upset that the parking garage security didn't notice and prevent this crime from happening. Eric and Pat filed a lawsuit against the company that runs the parking garage. The company (ABC Co.) defended, stating that on the back of the ticket is a clause which states the following in conspicuous lettering: "ABC Co. is not liable for any loss of contents or damage caused to vehicles parked in the garage due to its own negligence or the actions of any other person." Will the court uphold the clause on the parking ticket? Make sure to fully explain your answer. This means including the law that applies and the reasoning in applying that law.

Lease Classification, Considering Firm Guidance (Issues Memo)

Facts: On 1/1/20X1, Investor, Inc. ("Lessee") signed a Lease Agreement with Developer Inc. ("Landlord") to lease Landlord's newly constructed hotel located at 15 Main St. in San Francisco, CA. The lease term is 20 years, and the estimated life of the building is 40 years. Lessee will occupy all 4 floors of the building. The lease includes renewal options, exercisable at the Landlord's option, to extend the contract term for three additional five-year terms. No purchase option is present in the contract. Lessee's monthly rental payments are $40,000 per month, plus a monthly supplemental rental cost based on Lessee's sales (1% of sales). From experience, Lessee estimates that 1% of its sales should approximate an additional $10,000 per month. As of 1/1/20X1, the appraised value of the building is $15 million. For simplicity, please ignore discounting in this example (use of present value calculations, rates implicit in the lease, etc.). There are no residual value guarantees present.

Assume that this arrangement is within the scope of lease accounting guidance. As needed to clarify areas of judgment, support your response with guidance from both the Codification and from EY's most recent Lease accounting guide book.

The economy has been growing at an average rate of​ 2.5% during the last year. The chairman of the Federal Reserve has stated that due to the economic growth and improvement in the labor​ markets, as evidenced by a declining unemployment​ rate, that the Fed stands ready to increase interest rates. ​ Meanwhile, the government is having to deal with a growing budget deficit and may need to borrow money from the public to fund its operations. This is easily done with the sale of Treasury bills and bonds. ​ However, such an increase in borrowing could affect the results of the​ Fed's actions. ​ Also, any tax reductions that occur will likely affect expenditures by both consumers and businesses. This in turn is expected to increase GDP assuming no surprise events that would negatively affect employment and economic growth.

1. The reaction of the Fed Chairman is that the economic growth during this phase of the economic cycle could produce higher ______

and the​ Fed's number one goal is for stable ______.

2. The phase of the business cycle given the facts in the statement above implies the economy is not in a ______ phase.  

3. The​ government's increased demand for funds attained from the bond markets implies that as the supply of

bonds ________ holding demand​ constant, the price will ________ and pushing interest rates _______.

4. If interest rates increase due to the Fed​ actions, the economic impact is a result of _______ policy.

5. If the Fed does nothing but the government decides to increase bond​ sales, the resulting impact on interest rates would be a result of _______ policy.

6. Economic variables that predict the near term future condition of the economy are grouped together and called ______ indicators.

7. Unemployment rates exceeding ______ ​(spell out the​ value) percent would indicate the economy could be heading towards

a _______.

8. If the economic environment described above​ continues, business managers could see their cost of labor _______ in the near term if the unemployment rate goes ________, and financing costs further ______ because of anticipated Fed actions. All these events could produce​ (inflation/deflation) _______ which could in turn cause the business cycle to reach its ​ (peak/trough) ______.

Available data from Al- Hammy company for the month of march 2019 Joint cost $1850 Production Sales Product A 60 units 50 units for total revenue $1800 Product B 70 units 55 units for total revenue $1210 Depend on (S.V at split off point) gross margin percentage for product A would be:(5 Points)

%40

%50

%55

no answer

2.for above data the gross margin for product B would be:(5 Points)

$600

770

no answer

605

2. Sufficient Dwelling Coverage? Colton Gentry of Lancaster, California, has owned his home for ten years. When he purchased it for $178,000, Colton bought a $160,000 homeowner's insurance policy. He still owns that policy, even though the replacement cost of the home is now $300,000.

(a) If Colton suffered a $20,000 fire loss to the home, what percentage and dollar amount of the loss would be covered by his policy?

(b) How much insurance on the home should Colton carry now to be fully reimbursed for a fire loss?

MASLI Islamic Bank entered into an Istisna' contract with Pembinaan Berhad to build a factory in Ipoh, Perak for RM500,000, to be completed in 2 years.Total costs is RM400,000 (including pre contract cost of RM 25,000). Additional detail information as follows:

Year 1 Year 2

Cumulative costs incurred 300,000 400,000

Billings 280,000 220,000

Collections from purchaser(almustasni)230,000 270,000

Required:

Journalise the above said transactions pertaining to the above istisna' assuming the bank adopts the percentage completion method.