Question #1Lost Lagoon Limited (LLL), a privately held, December 31 year end, company with bonds trading on the open market, has the following independent situations. Reply to the required of each situation.

Situation #1:

LLL acquired and installed a tank farm on the site of its main manufacturing facility to purify brown water created by its manufacturing processes. This is in compliance with BC environmental regulations. The tank farm became fully operational on January 1, 2019 and will have an expected useful life of 20 years. LLL's depreciation is straight line basis over an assets estimated useful life.

The following data is provided relative to the tank farm installation.

1.The prime contractor's base price, excluding taxes, for the

installation of an integrated 10 tank water purification system

including land excavation, foundations, electrical and safety

devices, invoice rendered January 3, 2019............$6,750,000 +GST+PST

(Taxes are levied on the total invoice price.)

2.Early payment incentive; cash discount, net 10, EOM.................. 1.5%

LLL applies a discount lost account, if applicable.

3.Tax rates ......................................................................................GST:5%; PST:7%

4.Insurance premiums during installation, not covered

by the contract........................................................................$25,000 +GST only

5.Storage costs for tanks during installation caused by LLL

not having access routes ready for which it was

responsible..................................................................................$7,500 + GST only

6.No significant recoverable costs are estimated at the end of the tank farm's estimated useful life.

7.LLL will be required to restore the site of the tank farm to environmental standards at the end of its useful life. Based on current regulatory requirements and technologies, the estimated future cost to restore at the end of the farm's useful life is $850,000.

a.Of this $850,000, 20% is attributable to the normal deterioration of the tank farm if it were rendered idle and 80% of the future cost would be caused by the annual and even environmental degradation caused through normal operation wear and tear.

b.The appropriate discount rate applied is 4%

[Round all calculations to the nearest dollar; no cents]

Required #1-1:

Calculate (show calculations) the total value to be assigned to the capital asset, Tank Farm, as at January 1, 2019. Accounting entries are not required.

Required #1-2:

Calculate, no entry required, the balance of the Asset Retirement Obligation at January 1, 2019.

Required #1-3:

Provide all related entries, annualized, relative to both the Tank Farm and the Asset Retirement Obligation for the year ended December 31, 2019. Note, as per above, any initial entries on January 1, 2019 are not required.

Situation #2

LLL has bonds payable that are due in 2020 for $2,000,000. This amount is being reported as a current liability in the company's classified balance sheet at December 31, 2019. On January 15, 2020, before the audit was completed for the year ended December 31, 2019, LLL entered into an agreement to refinance the $5,000,000 bond with a replacement long term bond for the same amount.

Required: How should this bond be reported on the classified balance sheet as at December 31, 2019? Why?

Situation #3:

LLL provides the following list of a representation of its financial liabilities.

Trade accounts payable

$1,250,000

Dividends payable

600,000

Estimated warranty liability

75,000

Unearned revenue from advance customer deposits

100,000

Long term debt, current and non-current

5,000,000

Income taxes payable

40,000

GST payable

120,000

Asset Retirement Obligation

96,827

Royalties payable to BC government

45,000

Required: Comment, with explanation, on the list provided.

Situation #4:

LLL is reporting, appropriately, a on its Statement of Comprehensive Income a line item called Warranty revenue.......$25,000.

Required: What business conditions/type of warranty must exist that would result in this reporting?

Question #2

Reply to the following in good English.

2.1 List the significant implications that AI technologies will have on the future of the CPA profession?

2.2 List the discrete characteristics of Big Data (huge volumes of similar/related data) to help analyze it for purposes of 'cleaning' and 'stratifying' such data.

2.3 CPAs profess expertise in being able to evaluate the systems and processes that ensure data integrity. Part of this requires company's establishing an explicit cyber security framework. List the key components of any cyber security framework?

2.4 What conditions will result in cognitive automation?