The Wong family incorporated Alberta Wholesale Limited (AWL) on January 1, 20X1 when the company issued common shares to several family members for cash. After obtaining mortgage financing, the company constructed a warehouse and began a food wholesale business. The company has a small accounting staff that recorded transactions throughout the year. The companys CEO knows that cash is correct because she has reviewed the bank reconciliation. However, she was unable to hire a professionally trained CFO and is concerned that the draft financial statements prepared by her staff (Exhibit I), which are prepared using IFRS, may have errors including the final calculation of income tax expense based on a 30% income tax rate. The CEO has hired you to correct any accounting errors made by her staff by: 1. Providing a memo listing any adjusting entries that the company needs to make along with comments explaining why the company recorded items incorrectly and how and why the company should have recorded the transaction along with supporting calculations relating to adjustments. You should have at least one adjusting journal entry (you may need several entries for some issues) for each of the following issues. If an issue deals with more than one transaction, try to have an adjusting entry for each transaction within the issue.

Issue 1 AWL depreciates the warehouse using the straight-line method assuming no residual value and a useful life of 25 years. The company has opted to use the revaluation method (gross not proportional) on real estate and has obtained an appraisal of these assets from an independent appraiser. The appraiser estimated the fair value of the land at $1,800,000 and the warehouse at $13,000,000 as at December 31, 20X1.

Issue 2 The company purchased equipment costing $1,800,000 during the first week of May when the warehouse opened. All equipment has no residual value and an estimated life of 8 years. On October 1, the company sold equipment costing $240,000 for $175,000 cash. AWL bought other equipment costing $200,000 on July 1, 20X1. For equipment, the company uses the straight-line method.