There will be two cases in the course , each worth 5%, that will involve students applying financial accounting concepts to real-world applications. These are due in Unit 4 and Unit 9. Students are expected to do the following in each case:

Develop an ability to identify and assume an assigned role.

Identify and rank the importance of explicit issues.

Illustrate the importance of hidden (undirected) issues that arise from a detailed analysis.

Identify accounting issues (GAAP/IFRS compliance issues), assess their implications, generate alternatives, and provide recommendations within the bounds of GAAP/IFRS to meet the clients needs.

Examine how accounting standards impact financial measures (ratios, covenants, etc.).

Prepare a coherent report and integrated analysis that meets specific user needs.

Instructions

In order to complete your case analysis successfully, you should consider

identifying the role you are playing,

assessing the financial reporting landscape considering the user needs, constraints, and business environment,

identifying the issues,

analyzing the issues (qualitatively and quantitatively), and

providing a recommendation for each issue identified in the case.

You are required to prepare for the case before the class and bring any documents that will support your analysis. An average grade will come from you answering questions with basic coverage and accuracy, showing all your preparation. Additional points come from including greater detail, astute and informed commentary where appropriate, and connections to readings and other content.

Respond in a single Word doc (or comparable text editor).

Henriettas Pine Bakery

Background

You are an Analyst for the professional service firm, BUSI 1043 LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. Given the outstanding feedback you received on your first engagement working for Big Spenders Inc., a Senior Manager in the Financial Advisory group requested your support on a compilation engagement.

Additional Information

Henriettas was established in 1963 when it first opened its doors in Dwight, Muskoka on highway 60. Over the past 50 years, there have been four owners and is currently owned by Carine & Geoff Harris who incorporated and took over the store on January 1, 2013. Their sons, Kyle and Nicholas have been an intricate part of the business from dishwashing to head bakers. Henrietta's has grown over the years with the addition of new items all the time, but the "Sticky Buns and Clouds" remain the most popular items amongst the 150 varieties of bread and pastries.

Henriettas runs out of 90 square meters (1,000 share feet) of space. It has one entrance into the bakery and doors leading out to highway 60. Henriettas pays $5,000 per month for the rental of the space. Carine and Geoff were able to negotiate with the landlord and were not required to pay the first months rend in advance. All of the rental payments are current and up to date. For the last two years, Henriettas has had a very reliable accountant prepare its year-end financial statements and everything has been correct. This year, Henriettas accountant retired and Geoff did the best he could to record his own financial information. For the information he was not sure about, he kept all of the required supporting documentation. Geoff hired your firm, BUSI 1043 LLP to prepare his financial statements for the year. Geoff supplied you with his unadjusted trial balance and the information in Exhibit I to assist you.

Supplementary Information

The amount currently sitting in prepaids arose due the insurance policy last year. Geoff didnt know how to correct it, so he left it. This years insurance policy was purchased on November 1 for $9,000. The policy runs from November 1 to October 31 of each year.

Geoff didnt know how to record amortization for the year and so left it for you to record. Amortization for all assets is charged using a straight-line method by taking the cost of the asset and dividing it by its expected useful life. The assets have expected useful lives as follows:

Computer: 5 years

Bakery equipment: 10 years

Furniture and fixtures: 20 years

The information shows that Henriettas owes $400 for a telephone bill and $400 for electricity for December. These amounts have not been recorded yet.

Exhibit I Henriettas Pine Bakery Unadjusted Trial Balance December 31, 2015Account NameDebitCreditCash$35,000 Accounts Receivable5,600 Food Inventory21,000 Merchandise Inventory62,500 Prepaids3,400 Computers30,000 Accumulated Amortization Computers 12,000Bakery Equipment90,000 Accumulated Amortization Bakery Equipment 18,000Furniture and Fixtures150,000 Accumulated Amortization Furniture and Fixtures 15,000Accounts Payable 18,000Accrued Liabilities -Interest Payable

Dividend Payable -Long-term Loan 220,000Common Shares 50,000Retained Earnings 22,000Food Revenue 468,500Internet Revenue 127,000Merchandise Revenue 103,000Food Expense240,000 Internet Expense54,000 Electricity Expense65,000 Telephone Expense20,000 Interest Expense0 Salary Expense200,000 Insurance Expense9,000 Supplies Expense8,000 Depreciation Expense- Rent Expense60,000

1,053,5001,053,500

Based on the information, you have prepared the adjusting journal entries, an adjusting trial balance, the statement of earnings (income statement), statement of financial position (balance sheet), and statement of retained earnings. After you have completed the statements, prepare the closing journal entries and the posting closing trial balance. Ensure you show all of your work, and prepare proper journal entries and properly formatted financial statements.

Note to students: Issues are hidden within the case. It is your responsibility to read the case facts and identify the critical issues required for discussion and analysis.