Bennett Construction Ltd. (Bennett ) was founded 10 years ago by Peter Woodward, a carpenter and entrepreneur. Bennett is a growing construction company, building houses and doing major renovations for residential customers throughout the greater Toronto area. Peter is the president and sole common shareholder of the company. Bennett approached its credit union in early 2020 to increase its long-term debt to finance the purchase of equipment. A great deal of Bennetts equipment had been showing the strain of increased use and its efficiency was slipping. The credit union agreed to finance this purchase using the new equipment as collateral but has imposed a reasonably stringent debt to equity covenant. The credit union also requires audited financial statements. In the fall of 2020, Peter met Lynn Morgan, a partner with Morgan and Penny, Professional Accountants LLP (MP), and hired MP as the auditor. You work as a staff accountant at MP. Bennett has a fiscal year-end of 31 December 2020. Prior statements have not been audited and have been prepared solely for preparation of Bennetts tax return. Earnings in recent years have averaged $ 300,000. In a meeting with Peter recently, you took down the following notes regarding certain transactions which Peter has asked you to comment on the accounting policies that should be adopted. 1. Bennett received an order from a recurring customer, Topline, for custom built cabinets for its new large retail store in Richmond Hill. Bennett completed the cabinets on November 30, well ahead of the contract delivery date of December 9. Bennett had received $ 100,000 deposit for the cabinets in early October, with the balance of the contract of $ 150,000 to be paid upon delivery and acceptance of the cabinets by Topline. In early December, Topline notified Bennett that it could not take delivery of the cabinets until February 15, 2018 due to unexpected delay in the opening of the companys new store. Peter has heard a rumour that the reason for the delay in opening was because of Toplines inability to arrange financing for inventory. 2. Over the years, Bennett has acquired an extensive range of machinery and equipment, ranging from small hand-held pieces to its most costly piece of equipment, a top-of-the-line insulation blowing machine, purchased five years ago for $ 45,000 that now has a net book value of $ 30,000. A similar but more efficient machine will become available in February 2021. Bennett plans to replace the aging equipment when this new product comes on the market. Peter anticipates being able to sell the existing piece of equipment for $ 10,000. 3. In March 2020, Peter spent $ 20,000 on an extensive marketing and advertising campaign to generate additional business for Bennett. This expenditure was set up as an intangible asset.

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