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INTRODUCTION
• Founded: 2013, Vancouver
• Founders: Renuka Kaur, Thalia Brown (pharmacists)
• Flagship Branch: 5553 Burrard Street
• Expansion: 2018 - Two branches in West and East Vancouver;
2021 - Three branches in Burnaby, Surrey, Richmond
• Total Branches (as of 2021): Five
• 2023 Plan: Strategic BC expansion
• Current Status (as of 2023): Seeking investors for growth
• Business Model: Partnership
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CASE
Case Problem 1: Expansion Funding Dilemma

PROBLEM
• Challenge: Renuka and Thalia need funds for CoffeePills' BC expansion.
• Financial Gap: Current finances need to match expansion needs.
• Investor Image: Realizing their financials don't align, they consider manipulating
entries to attract investors, risking misrepresentation.
Case Problem 2: Temptation to Fabricate for Expansion
• Ambition: CoffeePills aims for significant expansion.
• Financial Pressure: Tempted to secure investment, Renuka and Thalia consider
fabricating financial entries, risking the company's integrity and legality.
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ADJUSTING
ENTRY
PROBLEMS
 Home Report About References GROUP CASE

ADJUSTING
ENTRY
PROBLEMS
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ADJUSTING ENTRIES PROBLEMS

1. Prepaid Rent: CoffeePills paid $120,000 on October 1, 2022, for six months of rent.
However, an error in the adjusting entry calculation resulted in underreporting rent
expenses, making the financial position seem stronger than it is.
2. Inventory Valuation: A physical count reveals that the ending inventory is $45,000.
Unfortunately, a miscalculation in the adjustment led to an overstatement of the inventory
value, falsely boosting the company's asset position.
3. Depreciation: The CoffeePills supplies that cost 220,000 has a useful life of 10 years
with no salvage value. Due to a clerical error, depreciation was not recorded accurately,
leading to an understatement of expenses and an inflated net income.
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ADJUSTING ENTRIES PROBLEMS

4. Unearned Revenue: Of the $250,000 received from retailers for future
supplies shipment, $55,000 worth of supplies have been delivered by
December 31. An error in the adjusting entry resulted in recognizing only
$195,000 of earned revenue, misrepresenting the company's revenue stream.
5. Accrued Expenses: The company incurred $100,000 in operating expenses
for utilities and maintenance in December, but the adjusting entry was
omitted. This oversight understates the expenses and overstates the net
income.
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TASKS
A. ADJUSTING JOURNAL ENTRIES (END OF 2022):
• MAKE A ADJUSTING JOURNAL ENTRY TO HAVE AN UPDATED AND CORRECT
BALANCE SHEET.
B. CALCULATION OF CURRENT RATIO (AFTER ADJUSTMENT):
• AFTER MAKING THE NECESSARY ADJUSTMENTS, CALCULATE THE CURRENT
RATIO USING THE CORRECTED BALANCE SHEET.
C. CALCULATION OF CURRENT RATIO (BEFORE ADJUSTMENT):
• CALCULATE THE CURRENT RATIO USING THE INITIAL, UNADJUSTED BALANCE
SHEET.
D. ANALYZE THE DIFFERENCES BETWEEN THE CURRENT RATIOS BEFORE AND
AFTER ADJUSTMENT.
• EXPLAIN HOW THESE CHANGES ALIGN WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP), EMPHASIZING THE IMPORTANCE OF
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CONCLUSION