Panamera Corporation (PC) is a private company, producing plastic bag. It has a December 31 year-end and follows IFRS. Jim Lo is the CEO of the company.
It is now September 15, You, John, CPA, joined in the company as CFO. In the first day of the office, surprised to learn that employees are unhappy with the enterprise resource planning (ERP) that was installed last July this year with $50,000 with 2 years useful life term. The ERP consists of general ledger, inventory, accounts receivable and an accounts payable module. Most employees are complaining that they need training to work on the ERP, then they could produce the report as and when necessary. For the training, the consultant provided the budget for $50,000.
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As part of your job, you meet with the President of the labour union who informed you that, last year company implemented profit sharing plan, where all the employees would receive a bonus based on the company’s after tax profit. As a result you reviewed the annual financial statements and met with the controller of the company and obtained the following information:
PC made an accrual for $350,000 against construction of the plant, although the construction work did not start yet. The controller explained that up next year they would start the contracting process and have pan to finish by the next year-end.
At the end of the day you met with the CEO to give him an update about your day 1 experience and CEO informed you that your role would be to give them right indication as they are planning to issue IPO with in next two years and expand the business to USA by obtaining 100% shares of ABC Corporation, based in New York.
Write a memo to CEO outlining the issues facing Panamera Corporation. Include a discussion on the problems encountered with the ERP and their impact on the company. You should the problems and suggestions relates with profit sharing plan.