Maple Gold Corp. (MGC) is a precious metal exploration and development company. MGC was established in 2016 by a management team and board of directors that has a successful history of creating shareholder value through the acquisition, exploration, financing, and development of gold projects. Th e company is traded on the Venture Exchange under the ticker MGC. The shares are trading at $0.20 per share, which is in excess of the book value per share, based on expectations that management can reproduce their past results.

MGC owns a small portfolio of prospective gold properties in Quebec and Ontario and is currently exploring in the Ring of Fire in Northern Ontario. The company is looking to expand its portfolio by purchasing various properties that span across Canada. Accordingly, management would like to display a strong financial position to assist in their search for new debt or equity capital.

Th e first year of operations was geared mostly toward establishing the business, closing deals on two properties, and beginning exploration activities. The 2017 fiscal year has been very hectic as MGC acquired an additional property and signifi cantly ramped up exploration activities. Management has been too busy running the day-to-day operations that they have not been able to devote a significant amount of time to the accounting duties.

Accordingly, they have just hired you, CPA, as controller in order to help management focus more of their time on property acquisition and development. It is now January 4, 2018, and you have been asked to help prepare the draft 2017 financial statements and year-end audit fi le. Th e draft statement of fi nancial position and income statement, along with excerpts from the notes to the financial statements, are found in Exhibit I. Exhibit II contains a summary of outstanding accounting issues from the current year-end fi le.

Required Prepare a report that analyzes all of the accounting issues you have identified. Be sure to explore alternative accounting treatments, where appropriate, and to provide a reasoned conclusion. Management has specifi cally asked that you provide a general discussion of the deferred tax implications of the accounting issues that you identified and analyzed. A detailed analysis is not required at this stage because the tax specialists will be performing the detailed calculations.

EXHIBIT I – FINANCIAL STATEMENTS MAPLE GOLD CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017, AND 2016

Transcribed Image Text:

Assets DRAFT AUDITED 2017 2016 Current assets Cash and cash equivalents Receivables $ 548,669 $1,020,920 48,595 55,785 Marketable securities 370,000 370,000 Exploration tax credit receivable 55,275 22,750 Due from related party 19,000 21,000 Prepaid expense and deposit 35,450 14,725 1,076,989 1,505,180 Mineral properties (Note 1) 6,700,500 4,485,775 Property, plant, and equipment 14,070 16,780 $7,791,559 $6,007,735 Liabilities and Shareholders' Equity Current liabilities Accounts payable and accrued liabilities $ 78,950 $ 87,950 Due to related party 17,000 12,000 95,950 99,950 Asset retirement obligation (Note 2) 84,700 79,900 Shareholders' equity Share capital (Note 3) 7,806,800 5,517,560 Contributed surplus (Note 3) 478,550 468,550 Deficit (750,296) (234,080) Accumulated other comprehensive income 75,855 75,855 7,610,909 5,827,885