Question 1 S.R., the owner of Amazing Cupcake Company, wonders whether interest costs associated with developing land can ever be capitalized. What does the Codification say on this matter? Please explain in your own words (this is getting you ready for the final project). (5 points) Question 2 The following information is available for the first four years of operations for Zhao Company: i. Year Taxable Income Tax Rate 2018 $650,000 19% 2019 725,000 21% 2020 855,000 21% 2021 862,000 21% ii. On January 1, 2018 heavy equipment costing $1,200,000 was purchased. The equipment had a life of 4 years and no salvage value. The straight-line method of depreciation is used for booki purposes and the tax depreciation taken each year is listed below: Tax Depreciation 2018 2019 2020 2021 Total $450,000 $425,000 $175,000 $150,000 $1,200,000 iii. On January 1, 2018, $580,000 was collected in advance for rental of a building for a four-year period. The entire $580,000 was reported as taxable income in 2018, but $435,000 of the $580,000 was reported as unearned revenue at December 31, 2018 for book purposes. iv. In 2018, the company recognized $80,000 in fine for pollution as an expense on the income statement. v. In 2019, the company received $40,000 interest on municipal bonds. Question 1 S.R., the owner of Amazing Cupcake Company, wonders whether interest costs associated with developing land can ever be capitalized. What does the Codification say on this matter? Please explain in your own words (this is getting you ready for the final project). (5 points) Question 2 The following information is available for the first four years of operations for Zhao Company: i. Year Taxable Income Tax Rate 2018 $650,000 19% 2019 725,000 21% 2020 855,000 21% 2021 862,000 21% ii. On January 1, 2018 heavy equipment costing $1,200,000 was purchased. The equipment had a life of 4 years and no salvage value. The straight-line method of depreciation is used for booki purposes and the tax depreciation taken each year is listed below: Tax Depreciation 2018 2019 2020 2021 Total $450,000 $425,000 $175,000 $150,000 $1,200,000 iii. On January 1, 2018, $580,000 was collected in advance for rental of a building for a four-year period. The entire $580,000 was reported as taxable income in 2018, but $435,000 of the $580,000 was reported as unearned revenue at December 31, 2018 for book purposes. iv. In 2018, the company recognized $80,000 in fine for pollution as an expense on the income statement. v. In 2019, the company received $40,000 interest on municipal bonds