Clear Vent is a privately held Canadian information services business that oers access to pricing tools for commodities (such as metals, etc.) and provides other relevant content including webinars and podcasts. Clear Vents customers are global businesses who pay for services via an annual / 12-month subscription fee that costs CAD $22,500 (for Canadian clients) and USD $30,000 for non-Canadian clients. As part of the annual fee Clear Vent customers can purchase tickets to an annual in-person conference held once per year for USD$1,000 (all customers must pay for the event ticket in USD). The event is also marketed and sold to non-clients at 10% more than the client rate and will be held in June this year. Addionally, members can pay for custom research initiatives for a separate cost. For members who sponsor a custom research project, Clear Vent manages the entire program, from initial scoping to nal deliverables. Approximately half of the members will require and pay for custom research at some point in a nancial year. Research projects are billed in advance. The Company was acquired by a private investor / new owner on December 31, 2022, who nanced the purchase with nancing from a bank. Clear Vent is now required to produce monthly nancial statements internally and for the bank as a condition of the loan. Note this loan is held by the owner and not in Clear Vents books. Requirements: You are the new accountant hired by Clear Vent on January 1st and have recently attended a meeting where the owner had several questions and requests. The owner has asked you to prepare (i) journal entries (ii) Income Statement and (iii) Balance Sheet for the activity related to the rst month (see activity details further below). The owner also asked you several questions which he would like you to respond to (see Appendix I for a list of the owners questions). Note: The business is run out of Canada and cost are typically incurred in Canadian dollars. The Company uses one exchange rate for the month and the USD to CAD rate used for ALL USD transactions during January is 1.339. The Canadian dollar weakened however and by the end of the month the closing month end rate was 1.355. Activity at Clear Vent during the rst month (Jan 2023): [in CAD unless otherwise noted] 1- On Jan 10th Clear Vent paid $150,000 (in advance) for rental of its annual oce space that runs from Jan 1st to Dec 31st, 2023. 2- Salaries are paid on the 15th and last day of each month; salaries per the payroll reports you obtained are: (assume all DAS have been remitted and ignore employer portion fringe benets) Jan 15: $8,500 Jan 31: $8,500 New owners implemented a bonus program that is expected to be paid at the end of the year at an estimated rate of 10% of salaries expense. 3- New data services and web / technology systems to run the business cost $4,000 per month (these are charged to oce expenses) 4- Insurance for the oce and to run the business was pre-paid on a 2-year cycle starting July 1st, 2022, at a total cost of $24,000. 5- Customers invoiced in each month subscribe to a standard 12-month membership and are required to join as of the rst of the current month (they are given retroactive access to content and data). The monthly sales report (for January) can be found in Appendix II. Customers who purchased tickets to the in-person conference are also noted in the report. 6- As of Jan 31st, your policy requires 5% of outstanding receivables as an allowance for bad debt. The Company has never recorded an allowance for bad debt in the past. 7- During January Clear Vent received an additional USD $27,000 from non-client on-line conference registrations. The revenue is collected immediately at registration and the credit card company charges a fee of 2% on all conference registrations up front. For simplicity Clear Vent expenses any fees in the month they are paid/incurred. 8- In January Clear Vent invoiced and collected $176,000 from US and Canadian customers for custom research projects, a non-taxable product. The project team provided you with a detailed status report in Appendix III. Revenue is recorded based on the % of completion of work each month. 9- The Company spent $5,000 in marketing to attract new clients. It also paid $52,500 in advance for various items required to run the June conference such as hotel (rooms and meals deposits), airline reservations and other services needed to operate an event. 10- On January 31st the Company repaid the USD $100,000 12 month note which carried a rate of 9% interest (assumed incurred evenly and paid each month end). 11- Half the accounts receivable and all the accounts payable from December have been collected / paid in January (all amounts originated in CAD). Appendix I Owners Questions for discussion at the next meeting: 1- He has asked if Clear Vent can use ASPE as the accounting framework. Is it acceptable and why? He wants to know what the dierent options are and what you recommend. 2- The owner asked you to explain what revenue recognition principles most appropriately guide Clear Vent with respect to how it will report each of its revenue streams. 3- He has also asked you to explain how each of the revenue streams are journalized when clients are invoiced and how and when they will be reported as revenue. He is particularly interested in the balance of Deferred Revenue and has asked you to identify each component of the balance separately based on the revenue streams (see excel le). 4- The owner presented you with an updated sales forecast for the next 3 months (Appendix IV) and asked you to provide a revenue projection (by revenue stream) for 2023 based on the assumption that all the deals will close as forecasted. Importantly, he is looking to understand; How the sales will translate to revenue in scal 2023 so he can better evaluate the business. How they will track versus the 2023 budget if all sales come in as forecasted. The budget extract is included in the excel le in tab V. Note Research revenue is not budgeted. Instructions: I- Written responses to the owners questions can be done on a word document and submitted in PDF. Keep the report to a maximum of 1 page (include full name and student # at the top of the page). II- The nancial accounting activity and related schedules can be completed in the attached excel le

Show transcribed data

Appendix III- Research Report Clear Vent research report *** Membership (subscription) sales to Canadian customers require a 5\% GST charged on top of the list price while USA based customers are not taxed. Ticket (event) sales are not taxable regardless of where clients are located. Post Closing Trial Balance and Worksheet As At December 31, 2023 Account Cash - CAD Cash - USD Accounts Receivable Allowance for Doubtful Accounts Prepaid Expenses GST Receivable Prepaid Research Costs Accounts Payable GST Payable Interest Payable Bonus Payable Deferred Revenue Notes Payable Share Capital Dividends Retained Earnings Sum Assets Liabilities Net Income * The foreign exchange rate for December ended was 1.325 Formulas - do not override ncome Statement or the period Ended January 31, 2023 \begin{tabular}{l|l|l|l} Chart of accounts & P\&L & Bal sheet & Journals \end{tabular} \begin{tabular}{|l|l|l|} \hline Account Name & & \\ \hline Cash - CAD & & \\ \hline Cash - USD & GL \# & F/S Mapping \\ \hline Accounts Receivable & 1000 & Cash \\ \hline Allowance for Doubtful Accounts & 1105 & Accounts Receivable \\ \hline Prepaid Expenses & 1050 & Cash \\ \hline GST Receivable & 1100 & Accounts Receivable \\ \hline Prepaid Research Costs & 1200 & Prepaid Assets \\ \hline Accounts Payable & 1300 & Other Receivables \\ \hline GST Payable & Other Assets \\ \hline Interest Payable & 2000 & Accounts Payable \\ \hline Bonus Payable & 2050 & Other Payables \\ \hline Deferred Revenue & 2100 & Accrued Liabilities \\ \hline Notes Payable & 2150 & Accrued Liabilities \\ \hline Capital & 2200 & Deferred Revenue \\ \hline Retained Earnings & 2300 & Notes Payable \\ \hline Subscriptions Revenue & 3000 & Capital \\ \hline Conference Revenue & 3100 & Retained Earnings \\ \hline Research Revenue & 4000 & Subscriptions Revenue \\ \hline Research Expense & 4100 & Conference Revenue \\ \hline Conference Expense & 4200 & Research Revenue \\ \hline Salaries Expense & 5000 & Research Expense \\ \hline Rental Expense & 5025 & Conference Expense \\ \hline Office Expenses & 5050 & Salaries Expense \\ \hline Research Costs & 5100 & Rental Expense \\ \hline Marketing Costs & 5200 & Office Expenses \\ \hline Bad Debt Expenses & 5300 & Research Costs \\ \hline Bonus Expenses & 5400 & Marketing Costs \\ \hline Insurance Expenses & 5500 & Bad Debt Expenses \\ \hline Card Processing Fees & 5600 & Bonus Expenses \\ \hline Interest Expense & 5700 & Insurance Expenses \\ \hline Foreign exchange & 5800 & Card Processing Fees \\ \hline & 5900 & Interest Expense \\ \hline & 5950 & Foreign exchange \\ \hline & & \\ \hline Chart of accounts & PQL & Bal sheet \\ \hline \end{tabular} Appendix III- Research Report Clear Vent research report *** Membership (subscription) sales to Canadian customers require a 5\% GST charged on top of the list price while USA based customers are not taxed. Ticket (event) sales are not taxable regardless of where clients are located. Post Closing Trial Balance and Worksheet As At December 31, 2023 Account Cash - CAD Cash - USD Accounts Receivable Allowance for Doubtful Accounts Prepaid Expenses GST Receivable Prepaid Research Costs Accounts Payable GST Payable Interest Payable Bonus Payable Deferred Revenue Notes Payable Share Capital Dividends Retained Earnings Sum Assets Liabilities Net Income * The foreign exchange rate for December ended was 1.325 Formulas - do not override ncome Statement or the period Ended January 31, 2023 \begin{tabular}{l|l|l|l} Chart of accounts & P\&L & Bal sheet & Journals \end{tabular} \begin{tabular}{|l|l|l|} \hline Account Name & & \\ \hline Cash - CAD & & \\ \hline Cash - USD & GL \# & F/S Mapping \\ \hline Accounts Receivable & 1000 & Cash \\ \hline Allowance for Doubtful Accounts & 1105 & Accounts Receivable \\ \hline Prepaid Expenses & 1050 & Cash \\ \hline GST Receivable & 1100 & Accounts Receivable \\ \hline Prepaid Research Costs & 1200 & Prepaid Assets \\ \hline Accounts Payable & 1300 & Other Receivables \\ \hline GST Payable & Other Assets \\ \hline Interest Payable & 2000 & Accounts Payable \\ \hline Bonus Payable & 2050 & Other Payables \\ \hline Deferred Revenue & 2100 & Accrued Liabilities \\ \hline Notes Payable & 2150 & Accrued Liabilities \\ \hline Capital & 2200 & Deferred Revenue \\ \hline Retained Earnings & 2300 & Notes Payable \\ \hline Subscriptions Revenue & 3000 & Capital \\ \hline Conference Revenue & 3100 & Retained Earnings \\ \hline Research Revenue & 4000 & Subscriptions Revenue \\ \hline Research Expense & 4100 & Conference Revenue \\ \hline Conference Expense & 4200 & Research Revenue \\ \hline Salaries Expense & 5000 & Research Expense \\ \hline Rental Expense & 5025 & Conference Expense \\ \hline Office Expenses & 5050 & Salaries Expense \\ \hline Research Costs & 5100 & Rental Expense \\ \hline Marketing Costs & 5200 & Office Expenses \\ \hline Bad Debt Expenses & 5300 & Research Costs \\ \hline Bonus Expenses & 5400 & Marketing Costs \\ \hline Insurance Expenses & 5500 & Bad Debt Expenses \\ \hline Card Processing Fees & 5600 & Bonus Expenses \\ \hline Interest Expense & 5700 & Insurance Expenses \\ \hline Foreign exchange & 5800 & Card Processing Fees \\ \hline & 5900 & Interest Expense \\ \hline & 5950 & Foreign exchange \\ \hline & & \\ \hline Chart of accounts & PQL & Bal sheet \\ \hline \end{tabular}