You have been hired by Halifax Port Authority (HPA) as the new controller in January, 2022 and your first task is to complete the annual financial statements for the year ended December 31, 2021. The Port of Halifax has recently undergone an Environmental Assessment Impact Review and anticipates it will have to retool its dredging equipment (equipment that cleans the harbour) to comply with new environmental standards. The newly elected provincial Conservative government has indicated the Impact Assessment Act (Act) which has been drafted as a result of the review will come into effect in late 2022 at which time all port authorities in Nova Scotia must comply with the new standards. Prior to this, HPA has complied with all government environmental legislation requirements.

Upon receipt of the unaudited annual financial statements for 2021 with 2020 comparatives, you observe that the Equipment account is $300,000 higher than it was in 2020 even though no new equipment acquisitions were permitted in 2021. When you inquire about this, the senior accountant informs you that the CEO asked her to set up an accrual in Accounts payable for the anticipated cost of retooling the dredging equipment as part of compliance with the new Act.

Required:

1. Prepare any necessary adjusting /correcting entries at December 31, 2021 for HPA.

• State any assumptions needed. Show any calculations if required. If no entry needed, state no entry.

2) EXPLAIN why you made the adjustment (or why no adjustment is needed) using and applying at least one FOUNDATIONAL PRINCIPLE AND one ELEMENT characteristic from the conceptual framework as support. (Point form is fine as long it is a complete thought)

1. Dec 31, 2021 Adjusting/correcting entry:

Dec 31, 2021	Debit	Credit

2. Explanation :