The founder, president, and major shareholder of DSharma Corp. recently Bold company to a national distributor in the same line of business. The change in ownership was effective June 30, 2023, halfway through DSharma's current fiscal year. During the due diligence process of acquiring the company and over the last six months of 2023, the new senior management team had a chance to review the company's accounting records and policies. DSharma follows ASPE. Although EPS is not part of ASPE, management calculates EPS for its own purposes and applies the IFRS guidelines. By the end of 2023, the following decisions had been made: 1. DSharma's policy of expensing all interest as incurred will be changed to correspond to the policy of the controlling shareholder whereby interest on self-constructed assets is capitalized. This policy will be applied retrospectively, and going forward it will simplify the consolidation process for the parent company. The major effect of this policy is to reduce interest expense in 2021 by $9,600 and to increase the cost of equipment by the same amount. The equipment was put into service early in 2022. DSharma uses straight-line depreciation for equipment and a five-year life. Because the interest has already been deducted for tax purposes, the change in policy results in a taxable temporary difference. 2. Deferred development costs of $18,300 remained in long-term assets on December 31, 2022. These were being written off on a straight-line basis with another three years remaining at that time. On reviewing the December 31, 2023, balances (after an additional year of depreciation), management decided that there were no further benefits to be received from these deferrals and there likely had not been any benefits for the past two years. The original costs were tax deductible when incurred. 3. A long-term contract with a preferred customer was completed in December 2023. When discussing payment with the customer, it came to light that a down payment of $30,800 the customer made on the contract at the end of 2021 had been taken into revenue when received. The revenue should have been recognized in 2023 on completion of the contract. DSharma's financial statements (summarized) were as follows on December 31, 2022 and 2023, before any corrections related to the information above. The December 31, 2023, statements are in draft form only and the 2023 accounts have not yet been closed. Question 7 (17 points) Listen 4 The founder, president, and major shareholder of DSharma Corp. recently sold his controlling interest in the company to a national distributor in the same line of business. The change in ownership was effective June 30, 2023, halfway through DSharma's current fiscal year. During the due diligence process of acquiring the company and over the last six months of 2023, the new senior management team had a chance to review the company's accounting records and policies. DSharma follows ASPE. Although EPS is not part of ASPE, management calculates EPS for its own purposes and applies the IFRS guidelines. By the end of 2023, the following decisions had been made: 1. DSharma's policy of expensing all interest as incurred will be changed to correspond to the policy of the controlling shareholder whereby interest on self-constructed assets is capitalized. This policy will be applied retrospectively, and going forward it will simplify the consolidation process for the parent company. The major effect of this policy is to reduce interest expense in 2021 by $9,600 and to increase the cost of equipment by the same amount. The equipment was put into service early in 2022. DSharma uses straight-lin depreciation for equipment and a five-year life. Because the interest has already been deducted for tax purposes, the change in policy results in a taxable temporary difference. 2. Deferred development costs of $18,300 remained in long-term assets on December 31, 2022. These were being written off on a straight-line basis with another three years remaining at that time. On reviewing the December 31, 2023, balances (after an additional year of depreciation), management decided that there were no further benefits to be received from these deferrals and there likely had not been any benefits for the past two years. The original costs were tax deductible when incurred. 3. A long-term contract with a preferred customer was completed in December 2023. When discussing payment with the customer, it came to light that a down payment of $30,800 the customer made on the contract at the end of 2021 had been taken into revenue when received. The revenue should have been recognized in 2023 on completion of the contract. DSharma's financial statements (summarized) were as follows on December 31, 2022 and 2023, before any corrections related to the information above. The December 31, 2023, statements are in draft form only and the 2023 accounts have not yet been closed. Daharma Corp. Statement of Financial Position December 31 Assets Current Assets Long term assets 2023 2022 192300 168400 322000 311000 Liabilities and Shareholders' Equity Current Liabilities 117000 103000 Long-term Liabilities. 166000 153000 Share Capital (1000 Shares) 50000 50000 Retained earnings 181300 173400 Dsharma Corp. Income Statement year Ended December 3 2023 2022 475000 460000 Revenues Expenses 378000 376000 97000 84000 Income tax (30% effective rate) 29100 25200 Net Income 67900 58800 Earnings Per share 6.79 5.88 Dividend declared, per share 6 2.5 Instructions: Prepare any December 31, 2023, journal entries needed to put into effect the decisions made by senior management. Where retrospective adjustments are made, record the journal entry to include the effect of Daharma Corp. Income Statement year Ended December 31 2023 2022 Revenues 475000 460000 Expenses 378000 376000 97000 84000 Income tax (30% effective rate) 29100 25200 Net Income 67900 58800 Earnings Per share 6.79 5.88 Dividend declared, per share 6 2.5 Instructions: Prepare any December 31, 2023, journal entries needed to put into effect the decisions made by senior management. Where retrospective adjustinents are made, record the journal entry to include the effect of income taxes.