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SWO Ltd. (SWO) is a manufacturing company located in Southwestern Ontario, which is publicly traded on the Toronto Stock Exchange. The company designs and develops stereo equipment. Your accounting firm recently began to be the auditor of SWO. You are a senior accountant with the firm, and have been assigned the year-end audit for SWO. Your firm’s partner has just met with the company’s management in early January, 2019, and discussed various accounting issues. The partner asked you to make a report to be provided to the client that addresses some of the accounting issues occurred in 2018. These accounting issues are listed as follows:
On September 15, 2018, the company entered into a forward contract with the Bank of Vancouver by locking the price of 600,000 kg of aluminum at $1.50/kg. Aluminum is used in the production of stereo equipment. As at December 31, the price of aluminum is trading on the Chicago Board of Trade at $1.25/kg.
What are some of the accounting issues?
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