Information about 2020 includes: The price and cost of inventory increased in 2020 but the units sold during the year and the units on hand at the end of the year were approximately the same as in 2019. Insurance on the building and equipment is the only prepaid the company has and is renewed every July 1 for a twelve-month period. The insurance rates remained consistent in 2020 but additional insurance was purchased on October 1, 2020 for the new equipment purchased on that date. Operating expenses consist primarily of salaries and insurance costs. No new employees were hired this year and salary increases did not occur. The bank loan requires the company to make fixed payments each year of $30. Land is valued at its fair value using the revaluation model under IFRS where increases in fair value are shown in other comprehensive income. Dividends of $10 were declared in December 2020 but will not be paid until February 2021.

Based on the information provided identify errors in the 2016 financial statements. There is a total of five (5) errors. Do this by providing the following: A brief explanation of the error Listing the accounts that would be affected (state if the account is overstated or understated no need to mention specific amounts) State the impact that the error will have on net income (does it cause net income to be overstated or understated?)

PART 4 - ANALYZING FINANCIAL STATEMENTS (10 Marks) The following is information extracted from the financial statements of Chinook Limited for 2019 and 2020. The 2019 financial statements are free from error and have been audited. The 2020 financial statements are draft statements and may contain errors. 2020 2019 Sales $780 $650 Cost of goods sold 570 455 Gross profit $210 $195 Operating expenses 50 50 Depreciation 10 Operating income $150 $135 Interest expense 10 15 Net income before income tax expense $140 $120 Income tax expense 28 24 Net income $112 $96 Other comprehensive income, net of tax 10 25 $122 $121 10 Current assets: Cash Accounts receivable (net) Inventory Prepaids $29 78 126 12 $245 $30 65 105 10 $210 $150 200 Noncurrent assets: Land Buildings Accumulated depreciation Equipment Accumulated depreciation (10) $160 200 (20) 400 (60) $680 300 (30) $610 $820 $925 Current liabilities: Accounts payable Income taxes payable Bank loan-current portion $74 28 $65 24 30 $119 $102 Noncurrent liabilities: Bank loan 400 $502 400 $519 Shareholders' equity: Common shares Retained earnings Accumulated other comprehensive income 180 208 35 $423 $925 180 96 25 $301 $820