Lusail Company builds oflice buildings. The ollice buildings are constructed under contract with reputable buyers. During 2016, Lusail Company began construction of an office building for AlKhor Corporation. The total price is $20 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: justification. On December 31, 2020. the market interest rule increased to 8", thus prompling Lusail Company to switch to the fair value method to account for its hands. On the same date, the fair value of the bond issue was estimated at $1,342.735. Although, IFRS does allow the use of fair value to acount for liabilities, there are many restrictions and requirements. Unfortunately, Lusail Company did not meet these requirements; a matter that enforced the company to follow the effective interest method in reporting for its bonds in the financial statements instead of the fair value method. Costs incurred during the year $2,000,000 $ 2,000,000 Estimated costs to complete as of Year-end S6,000,000 Billings during the year $1,000.000 1,000,000 Cash collections during the year $900.000 2016 2017 6,000,000 900.000 Requirements: 2018 4,750.000 1.250,000 5.000.000 4,300,000 2019 4,750,000 1,500,000 5.000.000 4,300,000 2020 2,250,000 656,250 4,000,000 4.800,000 2021 2,250,000 0 4,000,000 4.800.000 To properly fulfil the above construction project, Lusail Company leased a machine from Qatar Lcasing Corporation on June 30, 2018. The lease agreement calls for Lusail Company to make semiannual lease payments of S562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Lusail Company's incremental borrowing rate is 10%, the same rate Qatar Leasing uscs to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each financial year. The fair value of the machine is S3 million. 1. Briclly cxplain the major differences between U.S. GAAP and IFRS with particular cmphasis on the following accounting issues: Revenue recognition prior to delivery, at delivery, and after delivery: (1 Mark) ( Reporting for leases; und (1 Mark) ( Reporting liabilities at fair valuc. (1 Mark) 2. Show and discuss how the above financial transactions will affect the income statement and the statement of financial position for Lusail Company on December 31, 2016 and December 31, 2020 assuming that the company reports with U.S. GAAP and uses the percentage of completion method for its office building contracts. (3 Marks) (3 3. Show and discuss how the above financial transactions will affect the income statement and the statement of financial position for Lusail Company on December 31, 2016 and December 31, 2020 assuming that the company reports under IFRS and uses the cost recovery method for its office building contracts. (3 Marks) ( 4. Compare between your answers to requirements 2 and 3, and write a brief memo explaining which set of financial statements (those prepared according to IFRS or U.S. GAAP) is likely to produce a heller operating income (less). (1 Mark) In addition, Lusail Company issued on January 1, 2019 $1,500,000,4%, 5-ycar bonds. Interest on the bonds is paid semimanual on June 30 and December 31. The market interest for bonds of similar risk and maturity was 6%. Lusail Company was aware that according to the U.S. GAAP, companies are allowed to switch from the effective interest method to fair value method with little Lusail Company builds oflice buildings. The ollice buildings are constructed under contract with reputable buyers. During 2016, Lusail Company began construction of an office building for AlKhor Corporation. The total price is $20 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: justification. On December 31, 2020. the market interest rule increased to 8", thus prompling Lusail Company to switch to the fair value method to account for its hands. On the same date, the fair value of the bond issue was estimated at $1,342.735. Although, IFRS does allow the use of fair value to acount for liabilities, there are many restrictions and requirements. Unfortunately, Lusail Company did not meet these requirements; a matter that enforced the company to follow the effective interest method in reporting for its bonds in the financial statements instead of the fair value method. Costs incurred during the year $2,000,000 $ 2,000,000 Estimated costs to complete as of Year-end S6,000,000 Billings during the year $1,000.000 1,000,000 Cash collections during the year $900.000 2016 2017 6,000,000 900.000 Requirements: 2018 4,750.000 1.250,000 5.000.000 4,300,000 2019 4,750,000 1,500,000 5.000.000 4,300,000 2020 2,250,000 656,250 4,000,000 4.800,000 2021 2,250,000 0 4,000,000 4.800.000 To properly fulfil the above construction project, Lusail Company leased a machine from Qatar Lcasing Corporation on June 30, 2018. The lease agreement calls for Lusail Company to make semiannual lease payments of S562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Lusail Company's incremental borrowing rate is 10%, the same rate Qatar Leasing uscs to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each financial year. The fair value of the machine is S3 million. 1. Briclly cxplain the major differences between U.S. GAAP and IFRS with particular cmphasis on the following accounting issues: Revenue recognition prior to delivery, at delivery, and after delivery: (1 Mark) ( Reporting for leases; und (1 Mark) ( Reporting liabilities at fair valuc. (1 Mark) 2. Show and discuss how the above financial transactions will affect the income statement and the statement of financial position for Lusail Company on December 31, 2016 and December 31, 2020 assuming that the company reports with U.S. GAAP and uses the percentage of completion method for its office building contracts. (3 Marks) (3 3. Show and discuss how the above financial transactions will affect the income statement and the statement of financial position for Lusail Company on December 31, 2016 and December 31, 2020 assuming that the company reports under IFRS and uses the cost recovery method for its office building contracts. (3 Marks) ( 4. Compare between your answers to requirements 2 and 3, and write a brief memo explaining which set of financial statements (those prepared according to IFRS or U.S. GAAP) is likely to produce a heller operating income (less). (1 Mark) In addition, Lusail Company issued on January 1, 2019 $1,500,000,4%, 5-ycar bonds. Interest on the bonds is paid semimanual on June 30 and December 31. The market interest for bonds of similar risk and maturity was 6%. Lusail Company was aware that according to the U.S. GAAP, companies are allowed to switch from the effective interest method to fair value method with little