Evans Inc. has just started a small corporation that buys and sells booths for trade shows across Canada. The bank has lent Evan $50,000 and needs the 2022 financial statements to determine whether they will renew the loan. Evan will prepare the financial statements on his own, as there are not that many transactions. Evans Inc.’s shares do not trade on the stock exchange. Booths can be sold for anywhere between $20,000 to $200,000.

On September 15^th Kaur Inc. signed a contract with Evans Inc. for a booth and set up. The cost of the booth $80,000 and a selling price for the booth and set is $120,000. On September 25^th Kaur Inc. paid $25,000 to secure the delivery of the booth. On October 20^th Evans Inc. delivers the booth to Kaur Inc. with terms FOB shipping point. On November 1^st Kaur Inc. is supposed to pay Evans Inc. the balance due. Evans Inc. set up the booth on November 5^th. On November 10^th Evan Inc. received the money for setting up the booth. The estimated fair value to set up the booth is $2,500. The estimated fair value of the booth is $122,500.

On November 1st Kaur Inc. informs Evans Inc. that they will be not be able to pay their account that is due. The two parties enter into an agreement that the account will be converted into a non-interest bearing promissory note to be repaid in one year from now. Evans Inc. borrows fund at a rate of 4%. Kaur Inc. has various loans at 6% interest. The company’s year end is December 31^st.

i. Recommend which GAAP Evans Inc. should use. Support your answer. 

ii. Identify two key stakeholders of the company and what their objective is 

iii. From an ethics perspective explain any concerns you may have with this case.

iv. List the performance obligations? 

v. Explain when the revenue should be recognized for each performance obligation assuming the company uses ASPE. Support your answer by explaining why it should be recognized at the time you selected. Be sure to use GAAP to support your answer?

vi. Prepare the journal entries for 2022 and 2023. If there is no entry be sure to state no entry. In your answer do not use the discount on notes account.?

vii. If the company followed IFRS use the 5 step approach and apply each step to the question?

viii. Peer evaluation?

Answer rating: 100% (QA)

i Recommendation on GAAP Evans Inc should use ASPE Accounting Standards for Private Enterprises as its primary GAAP Generally Accepted Accounting Principles framework ASPE is designed for private ente... View the full answer