The comparative balance sheet of JSA Ltd. at June 30, 2013, is as follows:

Required
a. Calculate the various accruals on an item- by- item basis. For each accrual indicate the extent to which that accrual may contain a discretionary component and briefly explain why.
b. Briefly describe two other ways that researchers have used to estimate discretionary accruals.
c. A manager, whose bonus is related to reported net income, finds that net income for the year (before bonus) is below the bogey of the incentive plan. What type of earnings management might the manager then engage in? Which of the accruals in part a would be most suitable for this purpose?Explain.

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June 30, 2013 June 30, 2012 Assets Current assets: Accounts receivable (net) Inventories Prepaid expenses $ 76 35 S 60 53 113 37 114 39 Capital assets (net) Long-term investments Prepaid development costs 39 $194 $192 Liabilities and Shareholders' Equity Current liabilities: s 18 64 Bank indebtedness Accounts payable Customer advances Current portion of long-term debt Current portion of future income taxes 8 98 86 Long-term debt Liability for future income taxes Share capital Retained earnings 73 16 $192 28 $194 Sales Expenses 8233 Cost of sales Administrative and selling Research and development Depreclation and amortization Interest $184 35 4 14 240 Loss before undernoted items Income tax recovery Provision for reorganization Net loss for the year Cash flow from operations for 2013 was $7 (12) (12)