29 Jul ALGONQUIN OUTFITTERS IN ORDER TO COMPLETE YOUR CASE
Algonquin Outfitters In order to complete your case analysis successfully, you should consider identifying the role you are playing,assessing the financial reporting landscape considering the user needs, constraints, andbusiness environment,identifying the issues,analyzing the issues (qualitatively and quantitatively), andproviding a recommendation for each issue identified in the case. BackgroundYou are an Analyst for the professional service firm, BUSI 1043 LLP. Your firm specializes inproviding a wide variety of internal business solutions for different clients. Since you enjoyed yourtime in Muskoka compiling the Financial Statements for Henriettas Pine Bakery, the Senior Managerfrom your previous engagement gave you another northern Ontario client, Algonquin Outfitters.Additional InformationSince 1961, Algonquin Outfitters (AO) has been providing outdoor fun and gear for everyone fromfamilies to back-country adventurers. The family of stores in Algonquin Park and Muskoka has arange of equipment including outerwear and casual wear, mountain and road bikes, canoes, kayaks,wakeboards and waterskis, snowboards, alpine and nordic skis, and snowshoes. More than justcanoe trips, day hiking trips, and gear outfitting rentals they have grown in the 50 + years to beMuskokas destination for great outdoor gear, ski and snowboard service shop, bike shop, and allyour other Algonquin & Muskoka adventure service and rental needs.Algonquin Outfitters follows the Accounting Standards for Private Enterprises. Despite its revenues,AO operates with few administrative staff currently employing 12 individuals in addition to the ownerwho is there every day.The owner is considering expanding his operations into the Haliburton Highlands. In order to do sohe will have to look into financing options. He is contemplating two debt options: traditional bankfinancing or bonds. He is also considering selling some of his common shares to five of his friendsand relatives. He is unsure of how these options would impact him and the current organization ofhis company.In December of this year, one of AOs trucks carrying bike and ski lubrication was in an accident.The substance spilled into a local river contaminating the water supply. AOs layers have stated thatthe local residents have filed a lawsuit for $2 million. They expect that AO will be found guilty but thesettlement will be between $1.0 million and $1.8 million. AO has let its insurance policy expire andtherefore does not have any coverage.On December 31, four of AOs trucks were loaded with customer freight and sitting at AOs loadingdocks. The goods were delivered to the customers on January 5th and 6th respectively. The revenueof $80,000 was recorded in the books on December 31st.The owner knows about the importance of internal controls but believes he needs a refresher. Hehad an individual from purchasing leave earlier this year and is now using the accounts payableperson who also prepares the cheques to take care of all purchases. He is beginning to think that this is a good idea as it would save one salary. On the other hand, he does want to maintain controlsand is interested in eliminating all potential problems. He would like your recommendations abouthow he should deal with this.AO purchased equipment on January 1 five years ago for $80,000 and estimated an $8,000 salvagevalue at the end of the equipments 10-year useful life. On March 31st of this year, the equipment wassold for $21,000. The last entry to record depreciation was at December 21st of the prior year. Noentries for the sale have been made yet.The year end for AO is December 31st. It is now April 20th and you have been asked to provide amemo to your Senior Manager that can be used as the basis for discussion with the owner thataddresses the issues that concern you and the owner. You must address all of the issues in depthand provide recommendations on how to account for them.Prepare the memo.
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