It is now January $2023.$ CP needs to prepare its financial statements for the year

ended December $31,2022.$ You have obtained the following information about the

transactions that occurred during the $2022$ fiscal year:

I. On January $15,2022,$ CP sold $$15,000$ of its $2021$ inventory for $$20,000.$ On

the same date, CP identified that the remaining inventory was contaminated

with salt water and this inventory was discarded at no cost to CP$.$

II$.$ Sales of oil and gas related products were $$1,300,225($including the sales on

January $15,2022).$ CP sells all its product on credit with terms of net $30($i$.$e$.$

payment is due to CP from its customer in $30$ days after goods and services

are delivered to the customer$).$

III. CP purchased $$300,000$ worth of supplies for it$$s operations during the year.

All purchases were on credit. At the end of $2022,$ CP hadn't been billed for an

additional $$5,000$ of supplies that it purchased.

IV$.$ CP incurred maintenance costs on its various oil rigs of $$75,000$ during $2022.$

At the end of $2022,$ CP owed technicians $$16,000.($The $$16,000$ owed is

included in the $$75,000).$

V$.$ CP paid wages and bonuses of $$600,000$ to employees. At December $31,$

$2022,$ CP owed employees an additional $$50,000.$

VI$.$ During the year, CP collected $$1,275,000$ from customers.

VII. CP paid its suppliers $$250,000$ during $2022.$

VIII. During the year, CP paid the taxes it owed at the end of $2021.$ It also paid

$$11,000$ in instalments on its $2022$ income taxes. It is estimated that CP owes

an additional $$12,000$ in income taxes for $2022.$

IX$.$ The customer deposits reported on the $2021$ balance sheet pertained to

customers who were perceived to be high risk to which CP wasn't prepared to

offer credit. These customers were required to give deposits against products

to be delivered during $2022.$ These customers were delivered products during

$2022$ in excess of the amount of the deposits. CP decided in $2022$ to offer credit

to these customers. The deposits are not included in the other revenue

recognized in the year.

X$.$ Members of the Bell family sometimes used CP employees for personal work

at their homes and cottages to repair their heating and cooling equipment or

repair their decks and patios. Usually, the work was done on weekends and the

employees were paid at overtime rates. CP pays the employees' wages for the

work done for the family members and accounts for the cost as a wage

expense. The wages paid for work done on behalf of the Bell family members

was $$31,000.$

XI$.$ During $2022,$ CP purchased new equipment for $$128,000$ in cash.

XII. Depreciation expense for $2022$ was $$96,000.$

XIII. Prepaid insurance pertains to insurance on its equipment and buildings. During

$2022,$ CP used $$30,000$ of insurance that was recorded as prepaid on

December $31,2021.$ In late $2022,$ it purchased and paid for additional insurance

for $2023$ and beyond. The insurance cost $$31,000.$

Page $4$

XIV. During the year, CP paid $$17,000$ in interest to the holders of the long$-$term

debt. Interest is paid annually on January $2.$ In addition to the interest payment,

CP paid $$20,000$ on January $1,2022$ to reduce the balance owed on the long$-$

term debt. The interest rate on the notes is $8\mathrm{.}5\%.$

XV$.$ CP paid $$75,000$ in cash for other expenses related to operating the business

in fiscal $2022.$

XVI. CP paid dividends of $$155,000$ to shareholders.

XVII. During $2022,$ CP issued new common shares for $$20,000.$ This cash will be

used to purchase new equipment in $2023.$

XVIII. $($Bonus$)$ On December $25,2022,$ CP experienced an oil spill at one of its oil

and gas sites. The spill occurred due to severe weather conditions. CP paid

$$100,000$ to remediate the oil spill and return the site to its original condition.

Required:

Use the information about Canadian Petroleum Inc. $($CP$)$ provided above to do the

following:

$3.$ Prepare an income

statement and statement of retained earnings for the year ended December $31,$

$2022$