Reference no: EM132570968

Bennett Construction Ltd. (Bennett ) was founded 10 years ago by Peter Woodward, a carpenter and entrepreneur. Bennett is a growing construction company, building houses and doing major renovations for residential customers throughout the greater Toronto area. Peter is the president and sole common shareholder of the company. Bennett approached its credit union in early 2020 to increase its long-term debt to finance the purchase of equipment. A great deal of Bennett's equipment had been showing the strain of increased use and its efficiency was slipping. The credit union agreed to finance this purchase using the new equipment as collateral but has imposed a reasonably stringent debt to equity covenant. The credit union also requires audited financial statements. In the fall of 2020, Peter met Lynn Morgan, a partner with Morgan and Penny, Professional Accountants LLP (MP), and hired MP as the auditor. You work as a staff accountant at MP. Bennett has a fiscal year-end of 31 December 2020. Prior statements have not been audited and have been prepared solely for preparation of Bennett's tax return. Earnings in recent years have averaged $ 300,000. In a meeting with Peter recently, you took down the following notes regarding certain transactions which Peter has asked you to comment on the accounting policies that should be adopted.

1. In March 2020, Peter spent $ 20,000 on an extensive marketing and advertising campaign to generate additional business for Bennett. This expenditure was set up as an intangible asset.
2. Due to the expansion, Bennett constructed a new building and this was completed by the beginning of the summer of 2020. The old building has been declared a heritage site that cannot be torn down. This old building has been converted into 2 stores, which were rented out to two separate tenants with a two-year lease. Lease payments are a small fee of $ 100 a month plus 10% of revenues. Once Bennett has enough cash, the company wants to convert the building into a show room.
3. Bennett incurred $ 80,000 of costs in 2020 to develop a website for the company. This included acquired software, costs to register the internet domain name, research ideas on the style of the website, graphic design, consulting fees, training, and monthly updates on prices.

Required:

Question 1: Prepare the report requested. The structure of the case analysis should follow the CPA way of case writing requirement