Scenario:

You have been hired as an accountant by Russell Industries on December $31,2024.$ Upon arriving on

your first day, you are handed a trial balance by the CEO.After reviewing the trial balance and other accounting records you discover the following:

a$)$ The company uses a periodic inventory system with an average cost flow method. A count of

inventory on December $31$ st$,2024$ showed $97,000$ units on hand. The opening inventory on

hand at January $1^{st},2024$ was $107,000$ units. Russell Industries only sells one product.

b$)$ Below is a summary of the inventory purchases for the year ended December $31,2024$

c$)40,000$ units of inventory were shipped by the supplier on December $31,2024$ fob shipping point

at a cost of $$172,800.$ Insurance for the inventory while in transit costs $$3,449.$ This shipment is

not included in the above listing, or the physical inventory count. No adjustment has been

recorded for this purchase.

d$)$ The CEO provides the following collectability information for accounts receivable. He also

mentions that included in the over $120$ days balance is $$52,000$ owing from a company that has

since gone bankrupt. No collection is expected.

No adjustments have been recorded to the allowance for doubtful accounts.

e$)$ Bank fees of $$472$ for the month of December have not been recorded. Outstanding cheques

total $$34,000$ and there is an outstanding deposit of $$15,000.$ The bank made an error when

cashing a cheque on December $15$ th$.$ The cheque was written for $$625$ but cashed for $$652.$ The

bank account balance per the bank statement is $$1,100,501$ at December $31$ st$.$

f$)$ The balance in the prepaid expenses account is for building insurance for the period of January

$1^{st}$ to May ${31}^{st},2024.$ On June $1^{st},2024,$$$24,000$ was paid for insurance for the period of June

$1^{st},2024$ to May $31,2025.$ The entire $$24,000$ was debited to the Insurance Expense account. No

other adjustments for prepaids or insurance expense have been done

g$)$ The future bank loan payments are as follows:

a$.$ March $31$st$,2025-$ $$50,000$

b$.$ September $30,2025-$ $$50,000$

c$.$ March $31,2026-$ $$50,000$

d$.$ September $30,2026-$ $$50,000$Required:

Prepare any necessary adjusting entries.

Calculate the value of ending inventory and cost of goods sold.

Prepare a bank reconciliation at December $31,2024$

Prepare Russell Industries income statement and statement of changes in equity for the year

ended December $31,2024.$ Prepare a classified statement of financial position as at December

$31,2024.$

Prepare the closing entries for the year ended December $31,2024.$

Prepare the post$-$closing trial balance.

In April $2025,$ was discovered that $5,000$ units of inventory included in the ending inventory

balance was damaged at December ${31}^{st}$ and not saleable. Discuss how this error would impact

the $2024$ financial statements.