ABC Inc. showed income before taxes for 2023 of $201,000; for 2022, it was $124,000. However, SGI Chartered Accountants (SGI) reported the following errors had been made:

Sales for 2022 included $65,000 that had been received in cash during 2022, but for which the related products were delivered in 2023. Ownership of the products was not transferred until 2023.

Ending inventory on December 31, 2022, was understated by $19,500. The December 31, 2023, ending inventory has not yet been adjusted to the Inventory account. Assume that ABC Inc.s has a periodic inventory system and that no adjustment has been made to the opening balance of the Inventory account.

The internal accountant recorded interest expense for both 2022 and 2023 on loans payable, made the following entry each year:

Interest Expense 25,000

Cash 25,000

The bonds have a face value of $350,000 and pay a stated interest rate of 7.5%. They were issued at a discount of $25,000 on January 1, 2022, to yield an effective interest rate of 8%. (Use the effective interest method.)

Non capitalized repairs to equipment had been charged in error to the Equipment account during 2022 and 2023. In total, repairs in the amount of $10,500 in 2022 and $17,100 in 2023 were charged in that manner. The company uses the declining balance method and applies a rate of 10% in determining its depreciation charges.

Assume that ABCs Inc. applies IFRS.

The work has been assigned to Linsey Changes and the first thing that should be done is to prepare a schedule showing the calculation of corrected income before tax for 2022 and 2023. Once this is completed, your next step is to prepare the journal entries for 2023. You can assume the books are still open and you can ignore income tax effects at this point. Finally, you need to also consider what an investor may think considering these errors and include an opinion on the quality of ABC Inc.s earnings reported in 2022 and 2023.