Question 1 (45 marks) Ziggy's Inc. is a retailer of highly specialized clothing that opened for business on May 1, 2015, in a leased store in a strip mall. A condensed income statement for Ziggy's Inc. for its year, ended December 31, 2017, shows the following: Ziggy's Inc. Condensed Income Statement For the Year Ended December 31, 2017 unaudited (000s) Sales Cost of sales Gross profit General and administrative expense Other Income before income taxes Income tax expense Net income $ 1,932 (1,439) 493 (279) (54) 160 (13) S 147 1.An analysis of the cost of sales account revealed that the inventory is valued at average cost within each of the different styles carried. Since the owner is still learning what has appeal, a "mark-down rack" has become a common fixture at the back of the store. The tagged prices of the mark-downs are less than their costs, at December 31, 2017 by $700. This difference has not been recorded in the financial statements. 2.Cost of goods sold includes a charge of $1,800 to set up an allowance for returns (at 0.1% of sales) that are not subsequently saleable at full retail price. No such allowance was recorded last year-end because the company only discovered that the allowance was necessary this year. 3.General and administrative expenses include the following: Contributions to a registered pension plan made monthly for the two key employees, expensed by the corporation's accountant, were as follows: President and CEO Registered Pension Plan $21,000 Employment compensation $190,000