Andy Good-Feeling looked out of the window at the drizzling rain. Although it was grey and misty outside Andy was certainly feeling great. The health food business that he had established was starting to take off, riding on the wave of interest in well being and health consciousness that had caught on with young, and not-so-young, professionals. Every day their website blogs and X accounts were filled with feel good stories contributed by their many grateful clients and fans. Life should have been one long sweet song for Andy...but something seemed to be bothering him. He frowned as he turned away from the window. "I sometimes wish I wasn't so successful" he muttered to himself.

Good-Feeling Products Inc. (GFP) is a private company incorporated 3 years ago dedicated to the production and distribution of health products, cosmetics and gym equipment for the burgeoning health and well-being sector. All the shares are held by Andy and some close family and friends. Temporary cash shortfalls have always been met by the family or friends stepping in to bridge their needs, and Andy's own personal assets have often been sufficient to obtain modest bank loans. The office staff is quietly efficient looking after the day-to day administration, and Andy uses the services of Bud the tax whiz to prepare the HST, payroll and income tax returns. Bud is an expert on tax deductions and credits, and helps minimize the tax bills for Andy to the extent possible - "we don't want the government to take away all our hard-earned money, do we?"

Their three production lines - health foods, cosmetics and gym equipment - have all done extremely well. Their spectacular growth has led to increased financing needs, and they are considering going public in the near future. They have been generating modest profits in the last three years, and estimate a profit after taxes of $4,762,000 in 2023, based on a preliminary draft of their financial statements prepared by the administrative staff. The firm has not paid dividends in the past, preferring to finance their growth with internally generated funds as much as possible. To preserve cash, management receives part of their compensation in the form of stock options, and several employee stock option plans have been implemented in the past to tie in employee loyalty to the firm. Andy himself occasionally dons an apron and chef's hat for the annual employee picnic to barbecue hot dogs for the families of the employees.

In the past the firm has followed ASPE using the taxes payable method. However as soon as they go public they know that they have to adopt IFRS rules.

It is January 2024. GFP's fiscal year-end is December 31, 2023. Andy Good-Feeling, President of GFP, has taken a decision. "We must move on to the next step, and go public", he says to himself as he picks up the phone. He has remembered an old school friend (you) who went on to Seneca Polytechnic, an accounting degree, and a CPA designation, and who could help him out with his current problems. After the initial pleasantries Andy asks if you could come over to talk with him about some accounting issues related to his firm. You agree.

"Hey, as you know, I am just a guy who loves healthy wholesome food, fresh air and a healthy lifestyle", he says, shaking you warmly by the hand, "but I am completely lost in the new global business environment with all these new-fangled rules that they keep throwing at us. We will have to follow these international rules for our accounting, and have our financial statements audited by a recognized and respected auditing firm. Barney, my head clerk, is very hard-working and intelligent, but he just cannot keep up with all the changes that have taken place in the past few years. Aunt Agatha helps as much as she can. In fact she has given me an interest free loan of $1,000,000 to help us along. Since she is family, and the loan is interest free I think of it as her investment in the firm. I would have to pay the banks at least 4% to borrow that money. But she is facing a tightening of her financial position, and I may have to return her money in a year or two. Why don't you hop on board, study the situation, and tell me what I should do. Summer is around the corner, and we could put in a few rounds of golf too. You know what they say...all work and no play... ha ha". He would like you to prepare a report outlining alternative accounting policies and your recommendations. "Let me take a rain check", you say, continuing with the golf theme.

After giving the proposal a lot of thought over the weekend, you accept the offer.

Early Monday morning you arrive at GFP headquarters, and set to work.

The following information is collected by you:

1. GFP does not accrue warranty expenses for their products, expensing the amounts that are paid out to service the warranties. Based on the one-year warranty given by the company on the sale of their gym products you estimate that the company will have to pay $200,000 in warranties over the next year on gym equipment sales of $2,000,000 for 2023.
2. GFP issued $800,000 in $4 preferred shares on January 1, 2023. The 8,000 preferred shares must be redeemed, or bought back, at their $100 stated value per share, in 2025. The dividends are cumulative. If there are any dividends in arrears they must be paid before the redemption date. No dividends have been declared in 2023. The preferred shares are classified under shareholders' equity.
3. To conserve cash, an arrangement was made at the end of 2023 to exchange 10,000 common shares in GFP for equipment from their supplier. The supplier carried the equipment in its accounting books for $600,000, and the listed selling price in its catalogues was $900,000. Similar equipment is sold for $800,000 if cash is paid. Common shares were last issued at $100 per share. GFP recorded this share issue at $1,000,000, using the $100 price of the last issue
4. Again, to conserve cash, GFP has reduced cash salaries to top management staff and granted stock options as compensation in January, 2023. GFP provides only note disclosure of the stock options, which have been valued by options pricing models at $800,000, and vest at the end of 2024. The options may be exercised during 2025-2026. The services will be performed equally over the two-year period.
5. To gain employee loyalty, employee stock option plans are in place. The options, sold for $1 each, can be exercised at a strike price of $75 to buy one GFP share. The exercise period is 2024-2025. The employees have purchased 100,000 of these options, which are recorded as sales in the books of the company.
6. At the end of 2023 GFP bought back some of their own shares with a capital loss of $120,000. These shares are expected to be reissued when employee stock option plans are exercised. The loss from the repurchase has been included in other incomes and losses.
7. In 2023 GFP issued $1,000,000 in bonds at par with detachable warrants to make them more marketable. Every $1,000 bond has 5 warrants, each of which can be used to purchase one common share at a strike price of $75 per share during the exercise period 2024-2025. Without the warrants the bonds would be issued at 95. The entire proceeds of the bond sale have been booked as a liability.
8. On January 1, 2023 GFP purchased a 3-year insurance policy for $180,000 on its offices and equipment, and expensed the entire amount in that year.
9. GFP has been following the tax rules (CCA) for calculating depreciation expense, but would like to change to the straight- line method because it better matches the pattern of benefits obtained from their long-lived assets. UCC for the Property Plant and Equipment of the company at the beginning of 2023 was $600,000 and the book value would have been $700,000 if straight line depreciation had been used. In 2023 the depreciation expense and CCA were $80,000 and $60,000 respectively. No purchases of Property Plant and Equipment were made during 2023.
10. GF has had no collection problems from its clients, and feels that the current 2% of net sales applied to calculate bad debt expense is excessive, thinking that 1% would be more appropriate. Net sales in 2023 were $14,000,000.
11. Computer equipment with a fair value of $80,000 has been leased by the company. The lease term is 3 years, the implicit interest rate is 5%, the economic life of the equipment is three years, and the equipment will not have any residual value and remain with the firm at the end of the lease period. Payments of $27,978 are made at the beginning of each of the three years. The company has classified it as an operating lease until now.
12. In September, 2023, a client sued the company for $100,000 in damages for injuries suffered using the company's equipment. The lawsuit has not been resolved as yet. John Legalese, the company lawyer, thinks that the company could settle for an amount between $10,000 and $15,000.
13. Summarized statement of financial position for 2023 - the company had total assets of $12,000,000 and liabilities of $8,000,000.
14. The income tax rate is 30%.
15. The firm has covenants with their creditors to maintain their debt-equity ratio at or below 2.5:1.

Required:

1. On the basis of your recommendations calculate adjusted values for profit, assets, liabilities and shareholders' equity that comply with IFRS rules. (Do the journal entries for any adjustments that you may make to adjust the accounts to comply with IFRS)

Photo reference for calculation. Needs same like this pls