Hi Its all done Just need to rewrite thats all

This is the answer not a question. Thanks

Memo To: Bruce MacDonald From: CPA Re: Analysis of accounting issues and tax return preparation Accounting issues: Issue # 1: An agreement was made with the provincial government to harvest timber. The issue at hand relates to if an asset retirement obligation is to be recorded for replanting the trees at the end of the lease. Analysis: For this issue, ASPE gives guidance in ASPE 3110 Asset Retirement Obligations on recognition and measurement of AROs. In the standard, an ARO is defined as "a legal obligation associated with the retirement of a tangible long-lived asset that an entity is required to settle as a result of an existing or enacted law, statute, ordinance or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel." On recognition and measurement ASPE provides guidance in ASPE 3110 paragraphs . 05 and .14 as follows respectively: "an entity shall recognize a liability for an asset retirement obligation in the period in which it is incurred when a reasonable estimate of the amount of the obligation can be made." "a present value technique is often the best available technique with which to estimate the expenditure required to settle the present obligation at the balance sheet date. When a present value technique is used, an entity estimates future cash flows used in that technique on a basis consistent with the objective of measuring the asset retirement obligation." In the case of Quality, from the above we can see that it does have an asset retirement obligation. Quality will have to replant the trees it harvests at the end of the lease term. As for measurement, Quality estimates that it will cost $500,000 to replant the entire plot at the end of the 5 years. As of year-end, Quality has harvested around 10% of the plot. Recommendation: Per the above analysis, the asset retirement obligation should be recognized in the amount in which Quality has incurred it as of year-end which is 10%. Hence, the ARO will be 10% of $500,000 which is $50,000. In the case, we have a discount rate of 8%, therefore, in terms of present value this comes out to be $34,029 [50,000/(1.08^5)]. As this is an operating lease and not a finance lease it is not capitalized rather it is expensed. This will cause a decrease in net income and hence, lower taxes payable. The journal entry related to this will be: Cost of sales $34,029

Asset retirement obligation $34,029 Issue # 2: An investment of $400,000 was made for the common shares of Hinge Buddy Inc. (HBI). The issue at hand relates to whether the transaction can be recorded other than at cost, which is the case here to make the financials look better. Analysis: In this case, Quality holds 25% of HBI's shares. ASPE 3051 provides guidance relating to investments. Particularly, the standard states that "an investor may be able to exercise significant influence over the strategic operating, investing and financing policies of an investee even when the investor does not control or jointly control the investee. For example, the ability to exercise significant influence may be indicated by representation on the board of directors, participation in policy-making processes, material intercompany transactions, interchange of managerial personnel or provision of technical information." From this we can conclude that Quality does have significant influence as it owns 25% of HBI and can probably exercise significant influence over it has is evidenced by their presence on the board of directors and transaction between the two companies. Quality's ownership is also above the 20% guidance threshold outlined by ASPE, hence adding to the conclusion above. Furthermore, for accounting purposes, ASPE 3051 paragraph .08 outlines that: "Investment income, as calculated by the equity method, shall be the investor's share of the income or losses of the investee." Recommendation: Quality can choose to report under cost method (currently used) or equity method under ASPE. Under the equity method, it would need to report Quality's share of HBI's net income or loss every year. Since, HBI has had healthy financial outlook in the past, it would make sense to report under the equity method rather than cost method. The journal entry to record this extra income would be: Investment (HBI) 320,833 (1,400,000 * 25% * 11/12) Equity method income (HBI) 320,833 This will cause Quality's net income to increase by the above amount and will not affect taxes payable as equity method income is not included in income tax preparation. Tax Return Preparation: Please see exhibit I for details.