Pyramid Holdings Limited (PHL) is a private company based in Winnipeg, Manitoba, that off ers storage solutions, such as shelving units and organizers, to a variety of business clients. Joan Chen has been the bookkeeper for PHL for several years, and prepared a preliminary trial balance for the fiscal year ended March 31, 2017 (Exhibit I). The company chose a March year end to coincide with its business cycle. Th e company’s owner, James Steel, has been thinking of taking the company public in three or four years and would like to ensure the financial statements are attractive to potential investors.

When Joan Chen presented Jim with the preliminary trial balance for the 2017 fiscal year, a number of things struck him as being not quite right. Joan is not a CPA, so Jim prepared a list of items for follow-up with the auditor to make sure they are dealt with correctly (Exhibit II). During a heated discussion with Joan about several of the contentious issues on the list, Joan walked out of the meeting and quit before preparing PHL’s final trial balance and fi nancial statements.

You are the replacement bookkeeper assigned by the ABC temp agency to help PHL prepare fi nancial information for the auditor. You are currently completing your business degree in the evenings, and hope to write your CPA examinations in a year or two. The auditor will be arriving in a week. Jim offered to hire you as a full-time replacement, once your two-week assignment as a temporary bookkeeper is up, as long as you can “make the numbers look good” for him and the company. He indicated that he expects that when the company goes public, he will be able to pay you a $6,000 bonus “if you can get the job done right.” By coincidence, $6,000 is the exact amount you owe for your student loan, so it would come in quite handy!

You were able to call Joan, who provided you with some additional information (also in Exhibit II) before she left on a six-month trip to “parts unknown” where clearly, she does not want to be contacted again.

Required PHL follows ASPE, and Jim has instructed you (and the auditors) to use the simplest methods allowed for PHL’s financial statements. (Note: round all calculations to the nearest dollar.)

(a)

Prepare all adjusting entries required for the March 31, 2017, financial statements and also include them in an adjusted trial balance work sheet.

(b)

Jim would also like you to prepare a draft statement of financial position and draft income statement for discussion with the auditor. For purposes of calculating tax expense for the draft fi nancial statements, you can do what Joan has done in prior years: ignore the impact of any timing diff erences and assume that accounting income equals taxable income. (The auditors will provide a more specific estimate in a few weeks.)

(c)

Jim is also hoping that you can briefly summarize the requirements of “going public” for him, so that he will be prepared to discuss this with the auditors. (He specifically said you do not have to “run the numbers” for going public, he just wants to have an overview of the requirements of going public, including whether it will have any impact on PHL’s accounting policies.) There is no need to do an extensive report on the impact of going public in a few years, because Jim is relying on the auditors to provide that analysis separately next year.