Read the case linked in the assignments below carefully and identify the problem. Using FASB codification answer the problem correctly. (As followed) -

Problem identification:

Keywords:

Conclusion:

Case Solution:

Case 1:

Herb Construction Company is building a hotel for speculative purposes. That is, the Company has not yet found a buyer for the hotel, but expects to do so within a few months. Herb, who expects to spend about another two years to complete construction of the hotel, asks his accountant if interest and property taxes associated with this construction site should be capitalized or expensed. At what rate of interest should Herb use, if any, to capitalize any interest costs?

Case 2:

In order to help induce Jill Gregory to remain as president of the Reed Company, in 2000 it promises to pay her (or her estate) $200,000 per year for the next 15 yearseven if she leaves the company or dies. Reed wants to properly record this transaction as deferred compensation, but is unsure of how many years it should use to amortize this cost. Moreover, Reed also purchased a whole life life insurance policy for Jill, naming the company as the sole beneficiary. Reed wants to ascertain if it can offset the cash surrender value of the policy against the above deferred compensation liability.