Dan and Jay Sports own a small manufacturing facility making maple butter. Dan, the father, founded DairyCo 20 years ago and Jay, the son, recently joined the business. DairyCo distributes maple butter in bulk to retailers (e.g. restaurants, coffee shops etc) and does not sell directly to consumers. Recently, Dan had to retire from the day-to-day operations. However, he still sits on the Board of Directors as a shareholder.

You, CPA, just joined DairyCo as a Controller. DairyCo follows IFRS.

Jay is very excited about a new opportunity that knocked on their door this year. A medium-size retailer approached DairyCo to place their maple butter in their stores to sell to individual consumers.Jay thought this was a great idea even though this would require packaging the maple butter in individual containers which DairyCo has never done before. To finance the new business line, DairyCo had to obtain a loan from Maple Bank.

To bring the project to fruition, DairyCo had to upgrade its existing manufacturing equipment with an add-on in form of a conveyor and automatic 'arm' that pours the ready maple butter into the individual containers. The equipment was brought in from China. The purchase price of the equipment was $250,000 and the duty on the equipment was 15% of the purchase price. The transportation costs added up to $6,000. Jay purchased an insurance policy for $2,500 in case the equipment gets lost en route. Jay purchased a link to participate in a $1,000 webinar that explained how to install the equipment. After failing numerous times, Jay hired his cousin to install the equipment and paid him $500. A professional team was finally hired for $2,500 to install the equipment. The fee included testing of the equipment and training key personnel on the equipment as well. If the training was purchased separately, Jay would have to pay $1,500 just for that.

To make space for the new conveyor, the manufacturing facility (which is owned by DairyCo) had to be extended. A construction crew was hired to destroy a portion of the existing wall and extend the facility into the former backyard. The construction crew discovered a major leak in the wall and said that it was 'lucky' that the wall was being removed as it would have to be repaired in any case. The construction crew charged $32,000.

DairyCo stored excess maple butter in metal barrels at an encampment four hours north of Toronto to avoid refrigeration costs.Jay received word that there was a fire at the encampment last night. Once he arrived in the office this morning Jay started work on the insurance claim.He estimates that $25,000 of maple butter inventory was stored at the encampment. Based on initial reports the barrels look to be in good condition.Jay estimates that it will cost $5,000 to clean the salvageable barrels and transport them to Toronto for sale but then he should still be able to sell the butter inside.He does not expect to realize any insurance proceeds before DairyCo's year end but is filing a claim for the full $25,000 inventory value.