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Takamatsu Ltd introduced a new product to the market and started to manufacture it in 2020. As the company was uncertain about the reliability of the product, they started in 2020 to make a provision for warranty of 10% of the sales per annum. However, the product proved to be reliable. Management therefore decided to change the provision from 10% to 2% in 2023. The annual sales are provided below: For the year 2020 2021 2022 2023 Sales $100 000 $150 000 $220 000 $300 000 (a) Use NZ IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to discuss if this is a prior period error and in which financial reporting period this change should be recognised. (b) What will be the journal entry (if any) for 2023 resulting from the change in the percentage? Takamatsu Ltd introduced a new product to the market and started to manufacture it in 2020. As the company was uncertain about the reliability of the product, they started in 2020 to make a provision for warranty of 10% of the sales per annum. However, the product proved to be reliable. Management therefore decided to change the provision from 10% to 2% in 2023. The annual sales are provided below: For the year 2020 2021 2022 2023 Sales $100 000 $150 000 $220 000 $300 000 (a) Use NZ IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to discuss if this is a prior period error and in which financial reporting period this change should be recognised. (b) What will be the journal entry (if any) for 2023 resulting from the change in the percentage?
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Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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