Introduction:

This assignment will require you to research and analyze various financial accounting issues using the CPA Canada Handbook. Please review the Case Analysis Requirements listed in Appendix A.

Students may complete this assignment individually or with one other student in the class.

The analysis and thoughts in your report must be in your own words with proper referencing. The CPA Canada      Handbook is your main reference source to complete this assignment. If you take a passage from the CPA Canada Handbook, you must use proper referencing (further details on this are provided in Appendix A).

Deliverables:

•   All submissions should be completed in Microsoft Word and Microsoft Excel (other formats will not be

accepted). Your Word document response must be in 12-point font, single spaced. You are expected to     use Microsoft Excel for any supporting quantitative analysis. Please ensure you label all exhibits in Excel    (i.e., Exhibit A, Exhibit B, etc.) and reference the exhibits from your Word document as appropriate. There is no page limit for this case, but you should still endeavour to write a well written, concise response.

•    Please include a title page with the name of the instructor, student name(s), and student number(s).

•    Please submit your completed assignment (Word document) through the “Assignment” tab on the course OWL site by the due date listed below. E-mailed responses will not be accepted.

Due Date:

The assignment is due on Monday, April 3rd, 2023, at 11:59 pm ET. Any assignment received after the due date will be subject to a penalty of 10% for every 24-hour delay. Assignments not received within 48 hours after the due date (i.e., by Wednesday, April 5th at 11:59pm ET), will receive a grade of zero (0).

Due                                     10% Penalty

April 3, 11:59pm             April 4

Statement on Academic Offences:

20% Penalty

April 5

Zero

April 6 and beyond

All papers will be processed through plagiarism detection software (Turnitin.com) to check for academic honesty and integrity. Please be aware that working with others outside of this class and using material provided by other individuals will be considered cheating. Work that is not properly referenced is considered plagiarism.

Cheating and plagiarism are serious academic offences and will not be tolerated. Students that cheat or plagiarize will receive a grade of zero (0%) on this assignment and may face further academic penalties, such as     suspension from the University or expulsion. Western’s code of conduct will be enforced. Students are referred to the university policy on scholastic offences:

https://www.uwo.ca/univsec/pdf/academic_policies/appeals/scholastic_discipline_undergrad.pdf

Appendix A - Case Analysis Requirements

1.   The purpose of this assignment is to present you with an opportunity to read the CPA Canada Handbook and learn how to apply accounting standards to a real-life situation using the CPA Way. The CPA Canada                Handbook can be accessed through the Western Libraries’ website at: https://edu-knotia-                                  ca.proxy1.lib.uwo.ca/. You will need to login using your regular UWO username and password.

2.   You must base your response solely on the guidance contained within the CPA Canada Handbook. Any            reference to textbooks, websites, or any other source will not be evaluated, and no marks will be awarded to any content referenced from these sources. Students are cautioned to only use sources outside of the CPA   Canada Handbook for educational purposes; ensure your response to this case references the CPA Canada  Handbook and nothing else.

You should not assume that in-class coverage of relevant accounting standards was fully comprehensive. You are expected to read each Handbook section in its entirety and to determine which guidance is applicable to  address your issue and what is not. While not all sentences/paragraphs within the relevant Handbook section will apply to each accounting issue, many will. The grade you receive on this assignment will depend on your  ability to interpret the guidance you read, determine what is relevant, and provide a thorough response.

3.   You are expected to fully respond to each accounting issue you identify in the case to demonstrate your depth of knowledge. Appendix B outlines a suggested format of how to analyze accounting issues.

In addition, a sample accounting issue with a solution has been provided for your review in Appendix C. You should format your response following a similar process as demonstrated in the sample solution. The            accounting issue illustrated in the sample solution is very simplistic. The accounting issue(s) you will be         responding to in your case will be much more complex and require greater analysis.

4.   You are not required to discuss any financial statement note disclosures in your response.

5.    Marks will be awarded for demonstrating effective communication skills. You should prepare a response     that is professional in tone and is sufficiently readable in terms of spelling, grammar, punctuation, and use of acronyms/abbreviations. You should logically organize your analysis with appropriate formatting, such as headings and subheadings.  Your response should include complete thoughts; the use of paragraphs or point form, is acceptable as long as you provide complete thoughts. It is usually effective to use bullet points to identify criteria. Your analysis should be complete and thorough, but also concise. There are no extra marks  awarded for unnecessary words or fancy writing styles. Ensure all calculations are easy to follow.

6.    Handbook Referencing: you must copy and paste relevant sentences/paragraphs directly from the CPA         Handbook and include them in your response as demonstrated in the sample response in Appendix C. When doing this, please remember to:

a.    State which section/paragraph you are including, and

b.   Italicize anything copied and pasted from the Handbook. This will allow your reader to identify what is from the Handbook vs. what is your response.

It is usually effective to copy and paste a portion of the Handbook section that applies to the accounting issue you are writing about, and then immediately analyze the guidance using applicable case facts.

In the CPA Handbook you will see some text that is italicized and some that is not. The italicized paragraphs are the “rules” or “principles” . The text included underneath is to help provide further guidance on how to interpret and apply what is listed in the rule/principle.

Appendix A - Case Analysis Requirements (continued)

For example:

It is acceptable to include information from both areas in your response if it is relevant to your discussion. It is important not to dump lengthy paragraphs from the Handbook into your response without applying the guidance to case facts. If something from the Handbook is in your response but you haven’t interpreted it in   your own words afterwards as to how it applies to your case, or applied case facts against it, consider if you    actually need to have that guidance in your response.

Appendix B - How to Analyze an Accounting Issue using the CPA Way

You should follow the following format for analyzing your accounting issues in accordance with “The CPA Way” .

1.   Assess the situation / Identify the Issue – This should be a brief description of what you think the             accounting issue is. The purpose of this section is to highlight to your reader the key concerns in the case and explain what you hope to accomplish through your analysis. This should be 1-2 sentences to explain how the item has been accounted for using case facts and what you think the issue is (or state that it       hasn’t been accounted for yet). You may pose a question at the end to make it clear what you hope to     accomplish through your analysis (for example, “Does this item meet the definition of an asset under the conceptual framework?”).

2.   Analyze the issue – In order to properly analyze an issue, you need to have a combination of relevant     technical guidance AND relevant case facts to achieve depth. Arriving at the “correct conclusion” by simply inserting Handbook guidance in your response with no use of case facts, will result in very few (or no) marks being awarded.

Your analysis should address all relevant guidance (in the relevant Handbook section) for each issue. If    the relevant Handbook section you are reviewing has multiple criteria within it, you should analyze EACH relevant criterion. Analyzing only “some” criteria will result in only receiving “some” marks. For example, if you were analyzing revenue recognition, you would never analyze just one revenue recognition criterion – you would analyze all the revenue recognition criteria.

In addition, you must use case facts to support EVERY part of your analysis. For example, if you are       analyzing multiple criteria for a particular accounting issue, you should have at least one relevant (and usually distinct) case fact to support your analysis of each criterion.

Here are some potential formats you can use:

Issue with criteria

Handbook section _____ says that the following 3 criteria must be met in order to _____:

•    Criteria 1 – MET/NOT MET – case fact to support.

•    Criteria 2 – MET/NOT MET – case fact to support.

•    Criteria 3 – MET/NOT MET – case fact to support.

Issue with a specific technical rule

Handbook section ____ says that ….

In this case, …… . (discussion of how the technical rule applies using case facts)

3.    Conclude and Advise – You need to definitively conclude and/or make a recommendation on each            accounting issue discussed. If you are given information that allows you to quantify the impact on the     financial statements, do so here. If the issue requires an adjustment in the financial statements, you        should provide the journal entry(ies). Even if you are unable to quantify the impact, providing a skeleton journal entry (i.e., with debits/credits and account names) helps to show your reader you understand the related accounting impact. You should also describe the impact of your conclusion on any central            theme(s) in the case (i.e., compliance with a debt covenant, a bonus calculation, valuation, etc.)

Appendix C – Sample Case and Solution

The following is an example of a simple case with one accounting issue and a sample response using this format.

Case:

You, CPA, are a senior accountant at Casper & Jenkins LLP, a mid-size accounting firm in Woodstock, Ontario. Your partner comes to your desk on December 15, 2022, and tells you that the bookkeeper from one of your clients,     Savvy Electronics Inc., has sent an email with an accounting question. Your partner forwards you the email and      asks you to respond directly to the client with an answer.

Dear Partner,

As we talked about at lunch last week, Savvy Electronics has had another great year, but I think we just made a big mistake. We received a shipment of new portable speakers from overseas – the “MegaWoof 3000”. We got a great deal on them and planned on selling them both in the store and online. We purchased 2,000 units at a total   cost of $17.50/unit including freight, taxes and duty. Market research suggested we’d be able to sell them at a        retail price of $49.99 plus HST.

Unfortunately, the first 25 units sold were all returned because every customer said that at a loud volume the     speakers “blew” and stopped working. We contacted our supplier to return the remaining units, but they have   mysteriously gone out of business. The accounting for all the returned speakers has been done properly – I don’t need any help with that.

We know we can’t sell any of the remaining 1,975 units. We aren’t sure what to do with the remaining inventory  and we don’t know if this is going to have an accounting impact. We are pretty sure that we’ll be able to sell them to a scrap electronics recycler for $3 each sometime in January 2023.

Can you tell me what impact this is going to have on our financial statements this year? As you know, we have a December 31 year-end, follow ASPE and use a perpetual inventory system.

Sincerely,

Brenda Tam

Bookkeeper, Savvy Electronics Inc.

Sample solution on next page

Appendix C – Sample Case and Solution (continued)

MEMO

TO: Brenda Tam {Identify your audience}

FROM: CPA {Identify your role}

Measurement of faulty inventory products

{Including a descriptive title is a best practice so the marker can easily identify your individual discussions}

Assess the situation / Identify the issue:

Savvy Electronics (Savvy) has 1,975 units of faulty products currently left in inventory. How should this inventory be measured in the December 31, 2023 financial statements?

{This brief description has concisely introduced the situation to the reader and has identified that measurement is   the real issue here. Thus, the reader would expect that our upcoming analysis will be focused on analyzing relevant Handbook guidance relating to the measurement of inventories.}

Analyze the issue:

{Below we have clearly referenced relevant handbook guidance (including the specific handbook section and paragraph) and applied case facts to the guidance}

ASPE 3031.27 states that “the cost of inventories may not be recoverable if those inventories are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined.” {HB reference}

In this case, the returned products are damaged (the speakers “blew” and stopped working) and the company      indicated they can’t sell any of these units to external customers. This indicates the cost of the inventory may not be recoverable.  {Case facts}

ASPE 3031.10 states that “inventories shall be measured at the lower of cost and net realizable value”. {HB reference}

The cost of the inventory is $34,562.50 (1,975 units x $17.50). It was indicated that the units can not be sold to     external customers, but they are able to be sold to a scrap electronics recycler for $3 each, thus the net realizable

value is $5,925 (1,975 x $3). The cost exceeds the net realizable value, so a write-down is required. {Case facts} Conclude and Advise:

{Below we have provided a definitive conclusion, quantification of the impact, and the related journal entry}

Savvy will have to record a write-down on the inventory in the amount of $28,637.50 ($34,562.50 - $5,925). Using the indirect method, this will be recorded as a reduction in inventory on the balance sheet and a loss on the           income statement as follows: