Inorder to complete your case analysis successfully, you shouldconsider

• identifying the role you areplaying,
• assessing the financialreporting landscape considering the user needs, constraints, andbusiness environment,
• identifying the issues,
• analyzing the issues(qualitatively and quantitatively), and
• providing a recommendation foreach issue identified in the case.
  

Youare required to prepare for the case before the class and bring anydocuments that will support your analysis. An average grade willcome from you answering questions with basic coverage and accuracy,showing all your preparation. Additional points come from includinggreater detail, astute and informed commentary where appropriate,and connections to readings and other content.

Respond in a single Word doc (or comparable text editor).

Henrietta’s Pine Bakery

Background

Youare an Analyst for the professional service firm, FINACC LLP. Yourfirm specializes in providing a wide variety of internal businesssolutions for different clients. Given the outstanding feedback youreceived on your first engagement working for Big Spenders Inc., aSenior Manager in the Financial Advisory group requested yoursupport on a compilation engagement.

Additional Information

Henrietta’s was established in 1963 when it first opened its doorsin Dwight, Muskoka on highway 60. Over the past 50 years, therehave been four owners and is currently owned by Carine & GeoffHarris who incorporated and took over the store on January 1, 2013.Their sons, Kyle and Nicholas have been an intricate part of thebusiness from dishwashing to head bakers. Henrietta's has grownover the years with the addition of new items all the time, but the"Sticky Buns and Clouds" remain the most popular items amongst the150 varieties of breads and pastries.

Henrietta’s runs out of 90 square meters (1,000 share feet) ofspace. It has one entrance into the bakery and doors leading out tohighway 60. Henrietta’s pays $5,000 per month for the rental of thespace. Carine and Geoff were able to negotiate with the landlordand were not required to pay the first month’s rent in advance. Allof the rental payments are current and up to date. For the last twoyears, Henrietta’s has had a very reliable accountant prepare itsyear-end financial statements and everything has been correct. Thisyear, Henrietta’s accountant retired and Geoff did the best hecould recording his own financial information. For the informationhe was not sure about, he kept all of the required supportingdocumentation. Geoff hired your firm, FINACC LLP to prepare hisfinancial statements for the year. Geoff supplied you with hisunadjusted trial balance and the information in Exhibit I to assistyou.

Supplementary Information

• The amount currently sitting in prepaids arose due theinsurance policy last year. Geoff didn’t know how to correct it, sohe left it. This year’s insurance policy was purchased on November1 for $9,000. The policy runs from November 1 to October 31 of eachyear.
• Geoff has a note that he owed $900 in wages to hisemployees for the period ending December 31st.
• The loan was incurred when the bakery was opened. The loancarried an interest rate of 8%. The interest is payable two monthsafter year end and the principal is due in 2019.
• Henrietta’s will sometimes book special events with smallorganizations that are allowed to pay after the event has takenplace. On December 29th, a small company had a gathering at thebakery. The company was billed $1,089 and has 30 days to pay it.Geoff has not yet recorded this in his financialrecords.
• Henrietta’s declared a dividend of $5,000 on December30th.
• Geoff didn’t know how to record amortization for the yearand so left it for you to record. Amortization for all assets ischarged using a straight-line method by taking the cost of theasset and dividing it by its expected useful life. The assets haveexpected useful lives as follows:

o    Computer: 5 years

o    Bakery equipment: 10 years

o    Furniture and fixtures: 20 years

• The information shows that Henrietta’s owes $400 for atelephone bill and $400 for electricity for December. These amountshave not been recorded yet.

Exhibit I

Henrietta’s Pine Bakery

Unadjusted Trial Balance

December 31, 2015

Account Name	Debit	Credit
Cash	$35,000
Accounts Receivable	5,600
Food Inventory	21,000
Merchandise Inventory	62,500
Prepaids	3,400
Computers	30,000
Accumulated Amortization –Computers		12,000
Bakery Equipment	90,000
Accumulated Amortization –Bakery Equipment		18,000
Furniture and Fixtures	150,000
Accumulated Amortization –Furniture and Fixtures		15,000
Accounts Payable		18,000
Accrued Liabilities		-
Interest Payable
Dividend Payable		-
Long-term Loan		220,000
Common Shares		50,000
Retained Earnings		22,000
Food Revenue		468,500
Internet Revenue		127,000
Merchandise Revenue		103,000
Food Expense	240,000
Internet Expense	54,000
Electricity Expense	65,000
Telephone Expense	20,000
Interest Expense	0
Salary Expense	200,000
Insurance Expense	9,000
Supplies Expense	8,000
Depreciation Expense	-
Rent Expense	60,000
	1,053,500	1,053,500

                                                                                                                                                             

Basedon the information you have prepare the adjusting journal entries,an adjusting trial balance, the statement of earnings (incomestatement), statement of financial position (balance sheet), andstatement of retained earnings. After you have completed thestatements, prepare the closing journal entries and the postingclosing trial balance. Ensure you show all of your work, andprepare proper journal entries and properly formatted financialstatements.

Note to students: Issues are hidden within the case.It is your responsibility to read the case facts and identify thecritical issues required for discussion and analysis.