Carolina Roof Construction sells roofing supplies and equipment. Experience has shown the owner, John Fransen, that the sales have a significant seasonal variability. It is critical that the sales forecasts are accurate so Fransen can plan the cash flow of the business. The file Carolina Roof Construction Spring 2019 contains the sales figures for 2011 to 2018.  Produce a forecast using regression of deseasonalized sales and reseasonalize the forecast. Write a report to Frans and include your forecast for winter, spring, summer and fall sales for Carolina Roof Construction in 2019. Include in your report

a) the typical seasonal indexes for sales using the ratio-to-moving-average method,

b) the deseasonalized trend equation,

c) project sales for 2019 using the trend equation and seasonally adjust these values to find the predicted sales for each quarter.

Gidi Professional Institute is constructing a Tuition Center at Aboabo that will take about 18 months to complete. The company commenced construction on 2 January 2018.

        The following payments were made during the year:                              GH¢‘000

        31 January                                                                                                40,000

        31 March                                                                                                  90,000

30. June      20,000
31. October            40,000

        30 November                                                                                            50,000

The first payment on 31 January was funded from the company’s pool of debts. However, the company succeeded in raising Medium-Term Loan Notes for an amount of GH¢160,000,000 on 31 March 2018 at a simple interest rate of 9 percent per year, calculated and payable monthly in arrears.

These funds were specifically used for the construction. Excess funds were temporarily invested at 6 percent monthly in arrears and payable in cash. The pool of debts was again used for a GH¢40,000,000 payment on 30 November 2018 which could not be funded from the Medium-Term Loan Notes. The construction project was temporarily halted for three weeks in May 2018 when substantial technical and administrative work was carried out.

The following amounts of debts were outstanding at the reporting date of 31 December 2018:

        10% 7-year Notes 1/10/2018 with simple interest payable annually at 31 Dec         1,800,000

For the bank overdraft, the weighted average amount outstanding during the year was GH¢150,000,000 and the total interest charged by the bank amounted to GH¢6,760,000 for the year.

Required

        Calculate the total amount of interest to be capitalised                                                  

Tamarisk Inc. is a book distributor that had been operating in its original facility since 1990. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Tamarisk since 2015. Tamarisk’ original facility became obsolete by early 2020 because of the increased sales volume and the fact that Tamarisk now carries CDs in addition to books.

On June 1, 2020, Tamarisk contracted with Black Construction to have a new building constructed for $5,600,000 on land owned by Tamarisk. The payments made by Tamarisk to Black Construction are shown in the schedule below.

Construction was completed and the building was ready for occupancy on May 27, 2021. Tamarisk had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2021, the end of its fiscal year.

The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material.

(a)

Compute the weighted-average accumulated expenditures on Tamarisk’s new building during the capitalization period.

John Anders, CPA, has worked three years for a regional CPA firm. His responsibilities have been limited primarily to working on retail store audits and their related tax problems. Due to the resignation of several staff members during the year and the addition of several new clients, the firm is badly understaffed.

John’s firm is asked on December 10 to do the audit of a construction company for the year ending December 31. The president of the construction company, who is under indictment for income tax fraud, apologized for the late timing of the invitation. He explained that another CPA firm had been fired on December 9 due to sloppy work and incompetence. The client states that it must have the audit report for the annual meeting of stockholders on January 25.

The managing partner of the firm decides to accept the engagement. A major factor in the decision is that the firm does not have any clients in the construction industry and this will provide valuable experience. He promptly calls the president and accepts the audit.

The managing partner assigns John to the audit with instructions to start immediately and do the best possible job within the specified time constraints. By working alone for long hours and weekends, John completes the audit on January 23 and submits his working papers and audit report to the managing partner for review. The partner carefully reads the audit report and congratulates John on a job well done.

Please answer the following questions:

A. What steps in accepting the engagement were violated? Explain.

B. What auditing standard (s) was (were) violated in performing the audit? Explain.

QUESTION 1
a) In order to improve health care delivery in Ghana, among other things, the Government of Ghana in 2012
signed a contract with an Israeli construction company - Messrs Engineering and Development Consultant
to build a 650-bed medical facility. Construction began in April 2013 as a turnkey project. In 2015, the
University of Ghana, which had provided a 400-acre land for the construction of the hospital, established a
Special Purpose Vehicle (SPV) that will operate the facility. The name of the company is the University of
Ghana Medical Centre (UGMC) Limited. UGMC was completed in August 2017 and requires about 800
personnel when it is fully operational. The first phase of the project is priced at $217 million. The second
phase of the project requires about $50 million.
i. According to the typical features of project finance, does the project described above fit the
description of project finance? [4 marks]
ii. What is a turnkey contract and who does a Project company sign one with?
[3 marks]
iii. Under what conditions can the procurement of funds for the second phase of the project be termed
as mezzanine debt? [3 marks]
iv. Using probable scenarios, describe how the project may be affected by political and commercial
risks. [5 marks]
b) Assume that during the second phase of UGMC, an equipment that currently costs $950,000 is required. An
alternative will be to lease the equipment for a rental of $320,000 for 5 years. The interest rate is the last
two digits of your Students ID. Which is a better option for UGMC, lease or buy?
[5 marks]
[Total = 20 mark

Every year, Jessica Gomez, CEO of Logan Construction Company, takes a two week vacation to Barbados and signs multiple blank checks to pay for any major bills that come due while she is away. Jessica's vacation occurs towards the end of Logan's fiscal year. Carl Johnson, controller for the company, uses this practice for his gain. He identifies a very large invoice from a vendor, makes out a check to himself for that amount, and records it as a payment to the vendor for acquisition of supplies. He holds the check for several weeks to ensure the auditors will not review the canceled check. Not long after the first of the year, Johnson resubmits the invoice to Gomez for approval and records the check in the cash disbursements journal. Johnson then marks the invoice as paid and files away with other paid invoices. Johnson has been performing this activity many years and believes he has no risk of getting caught.

Required:

There are so many opportunities for improvement in the internal controls in this scenario. With an unlimited amount of funds, many people, and an unlimited time frame, a company could virtually eliminate all control risk. Practically speaking, though, that is not feasible for 95%+ of all companies. Small companies like Logan Construction especially struggle with control risk in the areas of acquisition and financing because they operate with minimal staffing, restrictive budgets, and a remote workforce.

If you were consulting with Logan Construction on internal control improvement opportunities, provide two short term suggestions for controls improvement, and one long term suggestion that the company might need to plan for financially or technologically.

The Zambian Government has embarked on various developmental projects throughout the country. The
projects include Water and Sanitation, Roads, Schools and Hospitals. Private companies have also invested
in shopping malls in various parts of the country. This has resulted in a boost for the construction industry.
a. Discuss why there is an increase in the use of steel as compared to concrete in most of the building
works around the country under construction.
b. Consider the iron value chain from material extraction to disposal, at what point according to your
assessment is the most energy used? As a design engineer, at what stage do you think is your
intervention most important and what role can you play in making iron more sustainable?

c. One of the project which the Government is implementing is the water project in Western Province
of Zambia particularly Mongu District. Two surface concrete reservoirs of 1.5 Mega litres each will
be constructed within the Central Business District (CBD). Since the site is within the CBD, the wall
fence should be built and source of sand for block moulding will come from the same site as the area
is sandy and it is quite large. As a material/site Engineer advice on the type of material, construction
and precaution which should be considered for this project.
d. Some works which have already been completed for the water project especially buildings
constructed of concrete roofing have started leaking after 1 year. What could be the possible causes
of leaking roofs and how can this be sorted out.