Case #1:

You are a senior accountant working for the accounting firm, Corrigan & Power. You have a new client, Summerby Inc. (SI), a quickly growing Halifax company that was listed on the Toronto Stock Exchange during 2020. SI is preparing for its upcoming December 31st, 2020 year end and has sought your advice on the accounting policies. SI is projecting earnings of $200,000 for the year and is concerned that they may not quite meet their projected earnings per share numbers communicated from the initial public offering.

As a result of the rapid expansion, SI has recently built a new manufacturing facility. During the year, SI applied for and received an innovation grant from the Nova Scotia government for $30,000 towards the cost of the facility. SI received the funds in November and booked this to other income as there are no repayment requirements.

You have been asked to prepare a memo to the CFO of SI with your supported recommendations for SI.

Required

Prepare the memo to the CFO.