Queen Lake Construction Ltd. uses an aggressive revenue recognition policy under the percentage of completion method for long-term construction contracts. Your review of this year’s new large construction contracts indicates that several significant projects have been recorded with high revenue for the first two years, and then have negligible earnings for the next three years.

Maple Manufacturing Limited constructs furniture out of maple wood. The furniture is prized for its durability and craftsmanship. Last year, the company received a letter from a governmental agency advising that it had been found that the factory was located on contaminated land that leached hazardous chemicals into the air. This was a preliminary letter stating that a full investigation into the health effects was underway. Management stated that everything is OK – the investigation was terminated. However, the client’s legal letter indicates that there are several lawsuits with respect to employee claims for long term disability due to a nervous disorder that affected employees’ ability to work. The employees claim that the nervous disorder is connected with the contaminated land. Neither the investigation nor the lawsuits are disclosed in the notes to the financial statements.

Save our Trees is a charitable organization devoted to maintaining national woodland and green space. The majority of its revenue is from fund-raising activities handled by volunteers who are unsupervised. Fund raising is handled primarily by means of electronic mail and door to door canvassing by these volunteers. Volunteers conducting canvassing provide receipts at the door using pre-numbered receipts from two-part booklets. When funds are raised by email, a separately numbered sequence is used and donors are sent receipts by email. Numeric sequences of receipts are not accounted for.