Accounting Fundamentals [ACCT-1071] Case Study #1 - Typhoon Lagoon Inc. You have just begun working at a mid-size accounting firm that specializes in small business consulting. New employees are assigned to teams that are mentored by an account manager to help new employees through the steep learning curve and to build a strong team dynamic, After the orientation, your account manager, Seymore Skinner, has your team's first assignment Your team's first assignment starts January 15, 2021. It is a new client, Typhoon Lagoon Inc. Ya family run outdoor water park located in Bird's Hill just outside the city. Until recently, the accounting function was performed by the owner's brother; however, he unexpectedly took an extended leave of absence due to medical reasons. The 2020 accounting was completed just before he left and the approved, year-end list of accounts is available in Excel Appendix B. All accounts have normal balances. The outdoor water park is open from May through September. It re-opens in mid-November through February as "Winter Wonderland," offering sledding, skating, and ice castles. Based on the success of the park, the owner has applied for a bank loan to extend the park's offerings. However, the bank wants to see the current year's audited financial statements before approving the loan. The owner, Montgomery Burns (Mr. Burns), has very limited accounting knowledge, and his assistant, Waylon Smithers, has stepped in to perform the bookkeeping function; however, there are several transactions that he is unsure how to handle. Your team's first deliverable will be to analyze the unrecorded transactions detailed in Appendix A and create any appropriate accounting entries for the current year financial records. For each transaction, provide a detailed explanation, including calculations where appropriate Your team's second deliverable will be to create an adjusted trial balance and a set of financial statements for the December 31, 2020 year-end, excluding the statement of cash flows that will be created by the team working on the company's cash budget. Finally, the team's third deliverable will be to answer the owner's questions regarding financial accounting. The questions arose during our initial meeting and are summarized in Appendix C. When responding to the owner's questions, keep in mind that he is not a professional accountant and may need more explanation than if your answers were addressed solely to me. Your response should conform to our firm's communication and presentation guidelines using Arial 12-point font with normal margins. All outside sources should be properly referenced in the American Psychological Association (APA) style. Draft financial statements for review purposes may be completed and forwarded in Excel and memos should be created using Microsoft Word. Please send your memos to me for review prior to sending them to the client. Appendix C: Owner's Questions The following questions were raised by Mr. Bums during the initial client meeting. Please draft a response and include it in your memo with the financial statements. 1. In managing the day-to-day operations of the water park, I focus on cash flow management as my priority and admit to having very little knowledge of financial accounting. Explain to me the objectives of the accrual basis of accounting and the purpose of adjusting entries. (4 marks) 2. I understand why the bank wants to view our statements before approving the expansion loan; however, why do they want the statements audited? Would there be others that want to review our audited financial statements? Why? (6 marks) 3. Our family is talking about opening a second water park in another city and allowing the younger generation to run it. Typhoon Lagoon would supply a start-up loan, but all other decisions would be made by my younger descendants. What forms of business organization are available to them and what are the pros and cons of each? Which would you recommend? (6 marks) 4. Before he took his medical leave, my brother was talking to me and my assistant about how we need to continue to follow Accounting Standards for Private Enterprises. Are there other bodies of accounting standards used in Canada, and what is the main difference? (4 marks) 5. My brother was also talking about financial statements and financial statement elements. Can you explain what these elements are and why they are important? (12 marks)