Your partner, Paddy O’Flaherty, has just dropped a mountain of files and other paperwork on your desk and left instructions for you. You notice at the top of the instruction sheet that he has marked the request urgent. As a result, you put your other work aside and begin to sift through the information.

Your firm has been a consultant for Iced Confections Inc. (ICE), a publicly traded company located in Windy Bay, Newfoundland, and founded by James McCormick. ICE manufactures the famous McCormick’s beverage, Icy Bay Lemonade. Your firm has been their consultant for five years. ICE’s year end is December 31. You are the brand new lead consultant for ICE. You were not originally assigned to ICE but you were given the task after the original consultant suddenly left for a job in the Caribbean.

ICE is currently in the process of a major expansion and it is looking into financing alternatives for the acquisition of manufacturing equipment to be used in its lemonade-making facilities.

ICE is currently in a cash crunch, although its sales and production have expanded considerably over the past 10 years. All of its other key ratios are in good order, which is allowing ICE to look at a variety of ways to finance its next expansion. The founder and major shareholder, James, is concerned about maintaining a healthy current ratio and debt to equity ratio as he believes this will be important in the future and the minority shareholders have shown some concern over these ratios in the past.

In addition, in order to fully understand the situation, ICE would like you to prepare journal entries for the first year for alternatives one, two, and three and the potential impact they will have on ICE’s ratios.

Your firm has been hired by ICE to assist it in exploring the various alternatives as described in Exhibit I. They would like your detailed analysis. This analysis should incorporate calculations, impact on fi nancial statements, and more qualitative impacts as you deem appropriate in the circumstances (such as impact to corporate structure, overall leverage, advantages, and disadvantages).

You have been made aware that the auditors will be arriving in a few months and ICE has asked you to ensure that all accounting recommendations are consistent with GAAP. In addition to the proposed machine acquisition, ICE has a few other accounting items that management would like you to comment on prior to the auditors’ arrival (Exhibit II).

Required Prepare the draft report to ICE.