Prepare a $2026$ trial balance.Bedrock Quarries Ltd$.($Bedrock$),$ wholly owned by Betty Rubble, has operated a sand and gravel pit since $2003.$ During that time, its revenues have increased moderately. On March $15,2026,$ after almost two years of negotiation, a purchase and sale agreement between Flintstone Sand and Gravel Ltd$.($Flintstone$)$ and Betty Rubble was completed whereby Ms$.$ Rubble sold Bedrock to Flintstone. Mr$.$ Flintstone, sole shareholder of Flintstone, was optimistic about the synergistic benefits that would accrue to the combined operations.

Exhibit I Extracts from financial statements for Bedrock Quarries Ltd$.($in $$000\text{'}$s$)$

$\backslash$table$[[$Balance sheet as at January $31,\backslash$table$[[2026],[($unaudited$)]],\backslash$table$[[2025],[($unaudited$)]],\backslash$table$[[2024],[($audited$)]]],[$Assets$,,,],[$Cash and cash equivalents,$\backslash$table$[[$$ $,23\mathrm{.}397]],$S $21\mathrm{.}215,\backslash$table$[[29\mathrm{.}219]]],[$Accounts receivable,$38\mathrm{.}903,28,869,22\mathrm{.}927],[$Inventory$,18,155,17\mathrm{.}011,29\mathrm{.}019],[\backslash$table$[[$Land at cost$]],3,637,3\mathrm{.}637,3\mathrm{.}637],[$Plant and equipment at cost$,93,987,93\mathrm{.}087,93,987],[\backslash$table$[[$Accumulated depreciation and$],[$depletion$]],(56,091),(51\mathrm{.}714),(47,195)],[\backslash$table$[[$Investment in and advances to$],[$associated company$]],9,394,9,165,\backslash$table$[[4\mathrm{.}716]]],[,$$$131,382,$$$122\mathrm{.}170\_,$$$136,310\_],[$Liabilities and shareholder's equir,,,$],[$Bank indebtedness,$ $,628,503,$S $21,120],[$Accounts payable,$22,695,24,17\backslash$theta $,20,325],[$Long$-$term debt,$43\mathrm{.}076,\backslash$table$[[39\mathrm{.}114]],47,101]]$ You have reviewed the working paper files of HLC and have held discussions with Mr$.$

Flintstone. All significant issues arising from your investigation, including your discussions,

are outlined in Exhibits II and III $.$ Key points from the purchase and sale agreement are

summarized in Exhibit IV$$

Exhibit II Notes from review of HLC working papers for the fiscal years $2023$ to $2026$

Based on your review of HLC$\text{'}$s working papers, you have learned the following:

Materiality for the engagements was set at $1\%$ of revenue for each year.

No review of subsequent events was conducted for any fiscal year.

A letter of representation was obtained from management in each fiscal year stating

that no contingencies or commitments existed, that no unusual transactions had

occurred, and that the financial statements were complete. Also, specific items

mentioned include the following:

Related$-$party transactions did exist.

Inventory was counted, costed$,$ and valued fairly.

In each year, one HLC staff member attended the year$-$end inventory count to

observe the procedures employed by Bedrock staff for the physical count and

valuation of inventory. Every year, accounts receivable were reviewed for

mathematical accuracy.

Harrison's fees for each year were based on $1\%$ of sales or $$200,000,$ whichever was

less, and the fees could not exceed a quotation from any accounting firm of similar

size and expertise.

Accounts receivable include amounts owed to Bedrock by Rubble Sales and Haulage

Ltd$,$ a company owned by Ms$.$ Rubble. The bank loan is secured by an assignment of accounts receivable and land and

equipment.

The accounting policies of Bedrock include the following:

Inventory is valued at net realizable value.

Revenue is recognized when products are ready for delivery.

Depreciation and depletion are calculated on a $10-$year straight$-$line basis.

Exhibit III Notes from discussions with Mr$.$ Flintstone

From discussions with Mr$.$ Flintstone, you have learned the following:

Mr$.$ Flintstone initially heard of Bedrock's financial results and financial position

from a friend of Mr$.$ Harrison who had periodically discussed Bedrock's operations

with Mr$.$ Harrison.

Mr$.$ Flintstone relied upon the Bedrock financial statements for the years $2023$ to

$2025$ before entering into the purchase and sale agreement.

Mr$.$ Flintstone claims that during a meeting on August $15,2025,$ HLC assured him

that the financial statements of Bedrock were free of any material errors for each of

the fiscal years $2023$ to $2025.$

Mr$.$ Flintstone reviewed the draft $2026$ financial statements prior to closing the deal.

Mr$.$ Flintstone had no knowledge of the nature and extent of HLC$\text{'}$s procedures for

Mr$.$ Flintstone considers himself very knowledgeable about the industry.

Exhibit IV Summary of key points concerning the purchase and sale agreement

The purchase price of Bedrock's shares is $$100$ million plus three times net income:

for the fiscal years $2026$ and $2027.$

HLC will remain Bedrock's accountants for fiscal $2027,$ after which the auditors of

Flintstone Sand and Gravel will assume the engagement.

Ms$.$ Rubble provided a general representation and warranty in the purchase and sale

agreement that all financial statements of Bedrock are true and correct.

Flintstone Sand and Gravel is entitled to have access to all of Bedrock's corporate

records in the course of its due diligence procedures.