It is February $10,2025,$ and you, CPA, a senior at a national CPA firm, are going over your notes from your afternoon meeting with Anna Marshall.

Anna came to your office looking for help with her business, Wonderful Wedding Planner Ltd$.($WPP$).$ Anna is the owner$-$manager of WPP that provides wedding planning and related services. WP plans a wedding from start to finish including photos, ceremony, and reception.

Anna recently approached her bank because she is considering applying for a loan, and she has now come to you for assistance. At her last meeting with the bank, the bank manager told Anna that $$WPP must include financial statements prepared in accordance with Accounting Standards for Private Enterprises $($ASPE$)$ for the year ended December $31,2024,$ with the loan application.

The partner in charge has asked you to provide a memo to Anna discussing the financial reporting issues related to the financial statements for the year ended December $31,2024.$

Selected Financial Information of WPP

$1.$ In $2024,$ WPP began collecting fully refundable deposits six months prior to customers$$ wedding dates. The deposits are to hold for the wedding date and will be applied against the total planning fee when the wedding occurs. These deposits have been recorded in revenue when received. As at December $31,2024,$ there was $$58,000$ in deposits relating to wedding in $2025.$

$2.$ In addition to the wedding planning services, WPP also co$-$ordinates regular wine tasting events. WPP is responsible for identifying events that are of interest to clients, securing spaces at the event, and then promoting the events to its clients. Venues will often put on events specifically to meet WPP$$s needs if a minimum number of clients can be guaranteed.

Clients pay the fees in advance to WPP and attend as part of the group. For example, if a wine tasting event cost $$50$ per person and WPP charges its customer $$75$ per person to attend. WPP booked an expense of $$50$ for each client for the fee paid to the venue and recorded $$62\mathrm{.}5$ in revenue for the amount collected from participants with a standard $25\%$ markup. If the clients are unhappy with the quality of the wines and complaint, the venue will handle all the complaints and WPP is not responsible for addressing customer concerns related to the venues selected.

During $2024,$ WPP has recorded $$53,000$ in revenue and $$42,400$ in expenses related to the wine tasting events.

$3.$ In early $2024,$ while attending a wedding hosted by WPP$,$ dangerous actions by a wedding guest resulted in a lawsuit by other guests. WPP was named as one of several defendants in the lawsuit. WPP was ordered to pay $$100,000$ and did so on October $10,2024,$ without consulting its lawyers. WPP$$s lawyer was unhappy with Anna for settling the lawsuit without consulting her and she immediately launched an appeal. A letter from the lawyer dated December $15,2024,$ indicates that she is positive that the $$100,000$ judgement against WPP will be refunded within two to three years since there has just been a similar case settled through appeal in a higher Canadian court where the defendant was refunded all of the original damages.

Anna now recognizes paying the lawsuit was a mistake. She would like to record a receivable for the reversal of the judgement.

Instructions

Assume the role of the CPA and discuss the financial accounting issue you identified in preparation of WPP$$s final financial statements for fiscal year ending December $31,2024($use the case analysis framework covered in the course, refer to the $$Discussion Section$$ for reference if needed$).$