ABC Limited $($ABC$)$ is a private company producing lunch packages. It mainly sells products to supermarkets and grocery stores. ABC has a loan from a local bank, which is secured by its accounts receivable and inventory. The loan is not to exceed $70\%$ of accounts receivable and $40\%$ of inventory as at the accounting year end $($December $31,2023).$ ABC uses perpetual inventory system. ABC must provide the bank with the reviewed financial statements within $60$ days of its year end.

It is now in early January $2024.$ You are a CPA from a local accounting firm and will conduct a review of the ABC$$s financial statements. You received a memo from the ABC$$s management including the following accounting issues:

$1.$ Super Software Co$.($SSC$),$ an ABC$$s neighbour, is a software development company with high growth in recent years. On August $15,2023,$ SSC signed a contract with ABC that SSC$$s employees can pick up a lunch package every working day for one year beginning on September $1,2023$ for a yearly fee of $$300,000,$ with $50\%$ payable upfront. The fee is non$-$refundable, non$-$cancellable, and not dependent on the number of lunch packages picked up$.$ When the contract was signed, ABC credited revenue for $$300,000$ and debited both cash and accounts receivable for $$150,000$ each.

$2.$ During November $2023,$ ABC paid $$30,000$ to purchase frozen chicken meat from Fresh Meat Butcher $($FMB$),$ a small meat supplier in financial difficulty. ABC has not begun to use the FMB$$s frozen chicken meat in producing lunch packages so far. In December $2023,$ there was an allegation that FMB$$s chicken meat could be polluted in the production process. The Canadian Food Inspection Agency is now investigating this allegation, and the outcome is uncertain.

$3.$ In December $2023,$ ABC just began to sell frozen lunch packages. To promote this new product, ABC signed contracts with stores, which specify that the actual number of packages sold to stores depends on the number of packages bought by consumers before the expiry date of packages. ABC has delivered $30,000$ frozen lunch packages to stores by the end of $2023,$ with a price of $$7\mathrm{.}50$ per package. The unit cost of frozen lunch packages is $$3\mathrm{.}50.$ ABC$$s suggested retail price of this lunch package is $$10\mathrm{.}00$ per package.

$4.$ In October $2023,$ ABC launched a loyalty program. According to the program, consumers can earn one point for buying an ordinary lunch package $($excluding frozen lunch packages$)$ and can redeem $20$ points for an ordinary lunch package in stores. ABC first uses packages purchased by stores for the redemption and then deducts them from its sales. On December $31,2023,$ stores reported that they had sold $150,000$ ordinary lunch packages to consumers at $$12$ per package since the beginning of the loyalty program, and that consumers had redeemed $18,000$ points. Ordinary lunch packages are sold to stores at $$8\mathrm{.}00$ per package. The cost of ordinary lunch packages is $$3\mathrm{.}80$ per package.

Required

You are asked to provide a report to the ABC$$s management to analyze these accounting issues. The report should be typed using double spacing and five or less pages long $($excluding the front page, and references if present$).$