Question: Craft Ltd is preparing its financial statements for the year ended 31 December 2021. The directors learned about errors in accounting balances as follows. (a)

Craft Ltd is preparing its financial statements for the year ended 31 December 2021.

The directors learned about errors in accounting balances as follows.

(a) The current tax provision of the prior year was understated by $50,000 based on the final self-assessed tax computation completed in the current year.

(b) The write-down for an item of inventory in the prior year was determined to be overstated. The item was sold in the current year for an amount that exceeded its net realizable value by $20,000

The directors are wondering whether (1) any adjustments are required, and if so, (2) show the journal entries to effect the change in estimates. In addition, (3) any disclosure requirements of changes in Accounting Estimates.

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