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The owner has asked you to prepare (i) journal entries (ii) Income Statement and (iii) Balance Sheet for the activity related to the first month

1- On Jan 10th Clear Vent paid $150,000 (in advance) for rental of its annual office space that

runs from Jan 1st to Dec 31st, 2023.

2- Salaries are paid on the 15th and last day of each month; salaries per the payroll reports you obtained are: (assume all DAS have been remitted and ignore employer portion fringe benefits)

- Jan 15: $8,500

- Jan 31: $8,500

- New owners implemented a bonus program that is expected to be paid at the end of the

year at an estimated rate of 10% of salaries expense.

3- New data services and web / technology systems to run the business cost $4,000 per month

(these are charged to office expenses)

4- Insurance for the office and to run the business was pre-paid on a 2-year cycle starting July

1st, 2022, at a total cost of $24,000.

5- Customers invoiced in each month subscribe to a standard 12-month membership and are

required to join as of the first of the current month (they are given retroactive access to content and data). The monthly sales report (for January) can be found in Appendix II. Customers who purchased tickets to the in-person conference are also noted in the report.

6- As of Jan 31st, your policy requires 5% of outstanding receivables as an allowance for bad debt. The Company has never recorded an allowance for bad debt in the past.

7- During January Clear Vent received an additonal USD $27,000 from non-client on-line conference registratons. The revenue is collected immediately at registraton and the credit card company charges a fee of 2% on all conference registratons up front. For simplicity Clear Vent expenses any fees in the month they are paid/incurred.

8- In January Clear Vent invoiced and collected $176,000 from US and Canadian customers for custom research projects, a non-taxable product. The project team provided you with a detailed status report in Appendix III. Revenue is recorded based on the % of completon of work each month.

9- The Company spent $5,000 in marketing to atact new clients. It also paid $52,500 in advance for various items required to run the June conference such as hotel (rooms and meals deposits), airline reservatons and other services needed to operate an event.

10- On January 31st the Company repaid the USD $100,000 12 month note which carried a rate of 9% interest (assumed incurred evenly and paid each month end).

11- Half the accounts receivable and all the accounts payable from December have been collected / paid in January (all amounts originated in CAD

The owner also asked you several questions which he would like you to respond

1- He has asked if Clear Vent can use ASPE as the accounting framework. Is it acceptable and why? He wants to know what the different options are and what you recommend.

2- The owner asked you to explain what revenue recogniton principles most appropriately guide Clear Vent with respect to how it will report each of its revenue streams.

3- He has also asked you to explain how each of the revenue streams are journalized when clients are invoiced and how and when they will be reported as revenue. He is particularly interested in the balance of Deferred Revenue and has asked you to identify each component of the balance separately based on the revenue streams (see excel file).

4- The owner presented you with an updated sales forecast for the next 3 months (Appendix IV) and asked you to provide a revenue projection (by revenue stream) for 2023 based on the assumpton that all the deals will close as forecasted. Importantly, he is looking to understand;

- How the sales will translate to revenue in fiscal 2023 so he can better evaluate the

business.

- How they will track versus the 2023 budget if all sales come in as forecasted. The budget

extract is included in the excel file in tab V. Note Research revenue is not budgeted

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