You have been hired as an accountant by Russell Industries on December 31, 2023. Upon arriving on

your first day, you are handed a trial balance by the CEO.

Russel Industries

Trial Balance

December 31, 2023

Debit Credit

Cash $1,082,000

Accounts Receivable 1,295,000

Allowance for Expected Credit Losses $13,000

Prepaid Expenses 11,000

Inventory 454,330

Equipment 66,000

Accumulated Depreciation - Equipment 26,400

Building 516,000

Accumulated Depreciation - Building 103,200

Land 150,000

Long-term investments 10,000

Accounts Payable 138,000

Salaries Payable 14,000

Bank Loan Payable 200,000

Share Capital 1,000

Retained Earnings 2,586,230

Dividends Declared 16,000

Sales Revenue 2,800,000

Sales Returns and Allowances 224,000

Purchases 1,300,000

Insurance Expense 24,000

Interest and Bank Charges Expense 5,500

Salaries Expense 728,000

$5,881,830 $5,881,830

After reviewing the trial balance and other accounting records you discover the following:

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

inventory on December 31 st showed 97,000 units on hand. Russell Industries only sells one

product.

b) Below is a summary of the inventory purchases for the year ended December 31, 2023

Date Units Cost/Unit

Jan 15 66,000 4.44

Mar 22 14,000 4.24

July 19 106,000 4.16

Sept 30 35,640 4.00

Nov 16 82,000 4.44

c) 40,000 units of inventory were shipped by the supplier on December 31, 2023 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.

Age Balance Estimated collectible %

Under 60 days $767,000 92%

61-90 days $435,000 88%

91-120 days $27,000 80%

Over 120 days $66,000 44%

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 15th. The cheque was written for $625 but cashed for $652. The

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

f) Annual depreciation of $6,600 on the equipment and $20,640 on the building has not yet been

recorded.

g) The bank loan payments are as follows:

a. May 31st, 2024 - $50,000

b. November 30, 2024 - $50,000

c. May 31, 2025 - $50,000

d. November 30, 2025 - $50,000

Required:

1) Prepare any necessary adjusting entries.

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

3) Prepare a bank reconciliation at December 31, 2023

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

ended December 31, 2023. Prepare a classified statement of financial position as at December

31, 2023.

5) Prepare the closing entries for the year ended December 31, 2023.

6) Prepare the post-closing trial balance.

7) It was discovered that the ending inventory count missed 5,000 units of inventory. Discuss

how this error would impact the financial statements.