Penny Blossoms Inc. (PBI) is a small private company that manufactures floral accessories. PBI incurred a...

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Penny Blossoms Inc. ("PBI") is a small private company that manufactures floral accessories. PBI incurred a significant amount of costs during the initial stage of the business with respect to developing its line of products. As a result, PBI has capitalized several of these costs with the rationale that they were incurred to generate future profits. Since there was such a large initial investment required, PBI obtained a loan from the bank and is required to submit audited Financial Statements each year. PBI's first year end is not until December 31, however they have already consulted with their auditors with respect to how they should record the initial investment costs. The auditors believe that several of the costs do not meet the criteria as set out in of ASPE $3064 - Goodwill and Intangible Assets and have said that they believe they are significant enough to require a reservation of opinion if they are capitalized at year end. The owner of PBI, Penny, thinks that the total costs that are being contested by the auditors are not significant to the overall amount of start-up costs. As a result, she has contacted your firm for a second opinion. To respond to this request, your partner would like you to draft a memo which outlines the one type of report you would recommend to be prepared for PBI including what actions need to be done next, and the type of procedures you would perform in connection with the engagement. Since Penny is unfamiliar with special reports, your partner has also asked you to include a general overview of the nature of the report, as well as a brief overview of the type of information and disclosures contained in the report you recommend. Your partner would like to use this report in her meeting with Penny tomorrow. Required Prepare the memo as requested by the partner. Penny Blossoms Inc. ("PBI") is a small private company that manufactures floral accessories. PBI incurred a significant amount of costs during the initial stage of the business with respect to developing its line of products. As a result, PBI has capitalized several of these costs with the rationale that they were incurred to generate future profits. Since there was such a large initial investment required, PBI obtained a loan from the bank and is required to submit audited Financial Statements each year. PBI's first year end is not until December 31, however they have already consulted with their auditors with respect to how they should record the initial investment costs. The auditors believe that several of the costs do not meet the criteria as set out in of ASPE $3064 - Goodwill and Intangible Assets and have said that they believe they are significant enough to require a reservation of opinion if they are capitalized at year end. The owner of PBI, Penny, thinks that the total costs that are being contested by the auditors are not significant to the overall amount of start-up costs. As a result, she has contacted your firm for a second opinion. To respond to this request, your partner would like you to draft a memo which outlines the one type of report you would recommend to be prepared for PBI including what actions need to be done next, and the type of procedures you would perform in connection with the engagement. Since Penny is unfamiliar with special reports, your partner has also asked you to include a general overview of the nature of the report, as well as a brief overview of the type of information and disclosures contained in the report you recommend. Your partner would like to use this report in her meeting with Penny tomorrow. Required Prepare the memo as requested by the partner.

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Memorandum To Partner From Your Name Date Current Date Subject Response to Request for Second Opinion on Initial Investment Costs Incurred by Penny Bl... View the full answer