Question two Great-Deals Ltd (Great Deals) a company incorporated on 1 January 2018 decided to change...

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Question two Great-Deals Ltd (Great Deals) a company incorporated on 1 January 2018 decided to change from First-in-First out to weighted average method. The company's financial year ends on 31 December. The following information (prior to accounting for changes in accounting policies) was extracted from the statements of profit or loss and other comprehensive income for the year ended 31 December: Revenue Cost of sales Other expenses Profit before tax Tax expense- Current Profit for the year Other comprehensive income Dividends declared and paid 2020 $ 1 600 000 Inventories (closing balances) Weighted average (new) FIFO (old) (800 000) (520 000) 280 000 (89 000) 191 000 20 000 2019 $ 1 300 000 (520 000) (498 000) 282 000 (102 200) 179 800 The information regarding change in accounting policy in respect of inventories is as follows: 2020 2019 2018 $ $ 220 000 240 000 180 000 260 000 $ 280 000 260 000 10 000 Retained earnings at the beginning of the year before taking change in inventory valuation method into account, amounted to $24 000 and $193 800 in 2019 and 2020 respectively. Required a) Calculate the retrospective and current adjustment that is required to effect the change in accounting policy. Show how the change affects the opening and closing stock. b) Prepare the journals that reflect the change in accounting policy. Re-draft the Statement of profit or loss and other comprehensive income and show the extract of the statement of financial position after effecting the change in accounting policy. Question two Great-Deals Ltd (Great Deals) a company incorporated on 1 January 2018 decided to change from First-in-First out to weighted average method. The company's financial year ends on 31 December. The following information (prior to accounting for changes in accounting policies) was extracted from the statements of profit or loss and other comprehensive income for the year ended 31 December: Revenue Cost of sales Other expenses Profit before tax Tax expense- Current Profit for the year Other comprehensive income Dividends declared and paid 2020 $ 1 600 000 Inventories (closing balances) Weighted average (new) FIFO (old) (800 000) (520 000) 280 000 (89 000) 191 000 20 000 2019 $ 1 300 000 (520 000) (498 000) 282 000 (102 200) 179 800 The information regarding change in accounting policy in respect of inventories is as follows: 2020 2019 2018 $ $ 220 000 240 000 180 000 260 000 $ 280 000 260 000 10 000 Retained earnings at the beginning of the year before taking change in inventory valuation method into account, amounted to $24 000 and $193 800 in 2019 and 2020 respectively. Required a) Calculate the retrospective and current adjustment that is required to effect the change in accounting policy. Show how the change affects the opening and closing stock. b) Prepare the journals that reflect the change in accounting policy. Re-draft the Statement of profit or loss and other comprehensive income and show the extract of the statement of financial position after effecting the change in accounting policy.

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a Calculation of Retrospective Adjustment 1 Retrospective Adjustment for Opening Inventory 2019 Under FIFO opening inventory for 2019 240000 Under wei... View the full answer