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PAINT INC. Paint Inc. (PI) has been operating as a family-owned private company for the past 30 years. It started as a company manufacturing paint for sale in its own retail stores in Ontario. PI is known as a manufacturer of high-quality paint. Since then it has expanded with stores across Canada and recently started a decorating business. It has no desire to go public at this point in time and wants to keep accounting costs as low as possible. With the recent real estate boom and new housing, the company has been very profitable for the past few years. PI has a loan with Canadian Bank. The bank requires audited financial statements and has a maximum debt-to-equity ratio. You have recently been hired as an accounting consultant to assist PIs board of directors. You have been asked to develop appropriate accounting policies for events that have occurred during 20X5. The board has asked that you explain fully your analysis for your recommendations. PI has a 31 December year-end. Review case facts thoroughly and address all concerns.

1) In 2015, PI sold a large quantity of paint to a board member who owns a new housing development. The paint was sold to the director for cash, and the director was given a 25% discount and 30 days to pay.

2) In February 20X6, PI was informed that one of its building contractors went bankrupt and would not be able to pay an outstanding receivable of $80,000. This receivable was not considered in determining their allowance for bad debts for 20X5

Marks are allocated based on the demonstrating proficiency of all accounting issues discussed.

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