In your audit of Avalon Industries for calendar year 20X0, you found some matters that you believe represent possible adjustments to the companys books. The possible adjustments include: 1 Several credit memos that were processed and recorded after year-end relate to sales and accounts receivable for 20X0. These total $23 000. 2 Inventory cut off tests indicate that $22 000 of inventory received on 30 December 20X0 was recorded as purchases and accounts payable in 20X1. These items were included in the inventory count at year-end and were therefore included in ending inventory. 3 Inventory cut off tests also indicate that $36 000 of sales invoices recorded on 30 November 20X0 were for goods that were shipped in early 20X1.The goods were not included in inventory but were set aside in a separate shipping area (Ignore cost of sales for this item). 4 The company has not established a reserve for obsolescence of inventories. Your tests indicate that such a $30 000 reserve is appropriate under the circumstances. 5 Your review of the allowance for doubtful accounts indicates that it is understated by $25 000. You have noticed that: managements attitude is that once the books are closed, theyre closed, and they do not want to make any adjustments. Planning materiality for the engagement was $100 000, determined by calculating 6% of expected income before taxes. Actual income before taxes on the financial statements prior to any adjustments is $1 452 800.

Required: a. Prepare the required adjusting journal entries. (10 marks) b. Explain the reason making the above entries. (4 marks) c. Why might Avalon Industries management resist making these adjustments? (2 marks)