Case $3($Chapter $04)$Student Handout Accrual Accounting ConceptsJanice Tamagi is the accountant for Thin Dime Ltd$.,$ which retails low$-$priced household products through over $20$ retail stores across Canada. The companys year end is December $31$ and Janice is preparing the financial statements for the current year$-$end. At this time, tension between management and staff is extremely high because a new collective agreement with the union representing most of the companys retail staff is being renegotiated. Management is pleading with the union representatives to reduce their request for a salary increase, claiming that the company simply cannot afford it$.$ Janice showed the draft financial statements with income before income tax of $$2\mathrm{.}8$ million to her boss, Anna Chen, who is the corporate controller. The reported net income had increased by $10\%$ compared with the prior year. After reviewing the statements and discussing them with Janice, Anna asked her to do the following:PART ONEItem #$1$: Most of the furniture owned by the company is depreciated over a $12-$year life and depreciation expense this year was $$600,000.$ Anna wants the useful life revised to $8$ years, which would result in a revised depreciation expense of $$900,000.$ Janice believes that it is possible for these assets to have a useful life of anywhere from $8$ to $12$ years.$($a$)$Determine the amount and prepare the journal entry to adjust the financial statements as proposed by Anna.$($b$)$Why do you think Anna suggested reducing the useful life of the furniture?Item #$2$: Janice noted that the company had received payment from their customers of $$200,000$ for goods to be shipped and sold January. Janice recorded the amount in revenue now, as the cash was received in December and she feels this reflects the timing better. $($a$)$Determine the amount and prepare the journal entry to adjust if necessary. $($b$)$Do you think that it is appropriate to record the revenue in December prior to shipment? Why or why not?Item #$3$: One of the companys stores will probably be shut down next spring. The final decision to do so has not yet been made. If the store is to be shut down, severance pay for the employees who work there would be $$400,000.$ Anna would like this amount accrued as salary expense in the current financial statements because it is highly likely to occur.$($c$)$Determine the amount and prepare the journal entry to adjust the financial statements as proposed by Anna.$($d$)$Do you think that it is appropriate to accrue an expense for the severance pay related to the possible store closure? Why or why not?Item #$4$: When Janice was preparing the financial statements, there were a few office expenses that related to December that she had not yet received the invoices for. For example, none of the stores had received their utility bills yet for the month of December. Because the financial statements had to be finalized promptly due to the negotiations with the union, Janice estimated the amount of these bills and recorded them in December. The total amount of this accrual was $$150,000.$ Anna felt that it was more prudent to accrue $$230,000$ rather than $$150,000$ just to be safe.$($a$)$Determine the amount and prepare the journal entry to adjust the financial statements as proposed by Anna.$($b$)$Do you think that the increase in the office expense accrual is justified? Why was it done?PART TWOa$)$ Determine amount of income before income tax assuming all the adjusting entries have been made. b$)$ Determine amount of income before income tax that should be reported for the company at the end of the year.