Mossman Incorporation
Mossman Incorporated
Mossman Incorporated (MI) operates a restaurant named Pressed located in downtown Toronto. The sole shareholder, James Mossman, is a successful international chef. After having trained as a sous-chef for several years, he finally settled in Toronto and incorporated MI. Pressed was originally owned by another chef that was looking to retire. The restaurant officially re-opened for business on March 1st, 2011.
It is now March 18th, 2011 and you, a senior associate, have been asked by Kate Lyndon, a partner at Lyndon, Ritorto & Singh LLP to accompany her to a meeting with James Mossman. During the meeting, James mentions that MIs financial statements for the December 31st, 2011 year end will need to be audited. An audit is required because James is considering selling one-third of his shares to a private investor for a price that will be determined based on the 2011 net income (before tax). The private investor wants to evaluate the success of the restaurant before investing in MI. Thus, the private investor is willing to wait up to one year before making a final decision. James is excited at this prospect because the restaurant has been very successful since it re-opened its doors and he believes he will be able to sell his shares to the private investor after the 2011 year is complete.
At the conclusion of the meeting, Kate asked you to identify the accounting issues pertaining to the preparation of MIs financial statements. She is concerned about the financial statements because MI only employs a part-time accountant who has limited financial reporting expertise. To help you address Kates request, you obtained information about MIs financial statements and transactions to date (Exhibit 1).
Required
Prepare the memo for Kate.
Exhibit