Case question

DSine Inc. (DSI) has been in business since 1985 and is one of Western Canada's largest furniture manufacturers.DSI collaborates with their customers to design and build furniture specifically suited to meet each customer's individual needs and they are known for their commitment to quality, innovation and service.Prabhjot Singh, the founder and current president, took the company public in early 2018.This has provided the necessary capital to allow DSI to expand into the lucrative US market.The company has seen a significant increase in sales orders and has therefore begun construction on a new 35,000 square foot manufacturing facility in Kelowna, BC.

Vishwas Grewal has been the controller at DSI since 2008 and made significant improvements to the financial reporting procedures.As the only CPA in DSI's small accounting department, Vishwas was the individual who made all major reporting decisions.In late 2018 Vishwas suffered some major health issues which resulted in him being frequently absent.In early 2019 Vishwas left DSI permanently.Since then Amanda Le, an accounting clerk working under Vishwas, has been the acting accountant.Although Amanda is not a CPA she has worked for DSI since 2005 and she is confident about her ability to handle basic accounting transactions.

It is now January 12, 2020, and DSI is preparing their yearend financial statements.Prabhjot has come to you, CPA, for advice.He wants to ensure that all transactions are recorded appropriately.He is particularly concerned as this is only the 2^nd year that the company has had their stock listed on the Toronto Stock Exchange.He knows that investors often react negatively to any reduction in the company's earnings per share.Prabhjot has provided a listing of questions that Amanda has about some complex financial reporting issues (see Exhibit A).Prabhjot has asked you to respond directly to Amanda

1.1.In late October, 2019, DSI was contracted to produce free-standing cabinets for a new high-end condo building in Vancouver, BC.The condo corporation chose a specialized wood from Brazil, which DSI ordered at a total cost of $295,000, shipped FOB shipping point.Shipping costs totalled $8,450.The wood arrived in early December and the factory immediately began producing the cabinets.Unfortunately, DSI discovered that the dry air in Canada causes excessive cracking.The production supervisor estimates that 20% of the wood cannot be salvaged.

Amanda recorded the purchase of the wood as a Dr. to Inventory and a Cr. to Cash and the shipping costs as a Dr. to Shipping Expense and a Cr. to Cash.