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Premium Sweet Inc. (Premium) is a medium-sized dairy operating in Atlantic Canada. The company's founder, Frank Morgan, owns 60 percent of the shares. Four private individuals, who have very little involvement in operating decisions, each own 10 percent. Premium produces milk, yogurt, ice cream, etc. that it sells through grocery stores and chains throughout the Maritimes. Over the last ten years, Premium has been facing financial crisis. Employers have many reasons why they might need to reduce employees pay. The most common reason of salary reduction is when an organization that is experiencing economic challenges may ask employees to take a salary reduction. An economic downturn has affected the company's sales, profitability, or its ability to succeed as a business. The company needs to save money, but the employer has decided that he cannot operate without the current number of employees. Thus, an employee layoff, employee furloughs, or any solution that will affect his ability to serve customers and create the product are not viable choices for the business. In a salary reduction situation, employees are generally not happy with the pay cut. But, depending on the economic circumstances, they may appreciate keeping their jobs. Over the years, labour and management have had an acrimonious relationship. Over the past ten years, the union representing Premium's employees have made significant wage concessions to avoid job losses. In the last contract negotiations, Premium and the union agreed that the union would have access to the company's financial statements. The upcoming negotiation will be the first time the union will receive the financial statements. You have been hired by the union representing Premium's employees to report on how to account for a number of controversial issues that arose on the union's review of Premium's December 31, 2021, financial statements and its preliminary discussions with Premium's management. The union will use your report in its assessment of Premium's financial position and performance, and its ability to pay higher wages and benefits to employees. The union leader has asked for your report to fully explain your recommendations, discuss arguments that Premium's management might use to counter your recommendations, and identify and discuss alternative treatments that Premium might present for the outstanding issues:

5. Early in 2021, Frank loaned Premium$250,000 to provide the cash to purchase needed capital assets. The loan is to be paid back in 2024. Premium expensed $40,000 in interest on the loan in 2021.

6. In January 2022, a large customer suffered a catastrophic fire that may put the customer out of business. Premium doesn't expect to collect any of the $55,000 it's owed by the customer and accrued an additional expense for the amount in 2021.

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