E$21\mathrm{.}11($LO $1)($Error Correction Entries$)$ The first audit of the books of Gomez Limited was recently carried out for the year ended December $31,2023.$ Gomez follows IFRS. In examining the books, the auditor found that certain items had been overlooked or might have been incorrectly handled in the past:

At the beginning of $2021,$ the company purchased a machine for $$450,000($residual value of $$30,000)$ that had a useful life of six years. The bookkeeper used straight$-$line depreciation, but failed to deduct the residual value in calculating the depreciation base for the three years.

At the end of $2022,$ the company accrued sales salaries of $$47,000$ in excess of the correct amount.

A tax lawsuit related to the year $2021$ was settled late in $2023.$ It was determined that the company owed an additional $$81,000$ in tax related to $2021.$ The company did not record a liability in $2021$ or $2022,$ because the possibility of losing was considered remote. The company charged the $$81,000$ to retained earnings in $2023$ as a correction of a prior year's error.

Gomez purchased another company early in $2019$ and recorded goodwill of $$500,000.$ Gomez amortized $$25,000$ of goodwill in $2019,$ and $$50,000$ in each subsequent year. The tax treatment for goodwill was properly applied.

In $2023,$ the company changed its basis of inventory costing from FIFO to weighted average cost. The change's cumulative effect was to decrease net income of prior years by $$45,000.$ The company debited this cumulative effect to Retained Earnings, and recorded the related income tax effect. The weighted average cost formula was used in calculating income for $2023.$

In $2023,$ the company wrote off $$63,000$ of inventory that it discovered, in $2023,$ had been stolen from one of its warehouses in $2022.$ This loss was charged to the Loss on Impairment account in $2023.$

Instructions

a$.$ Prepare the journal entries in $2023$ to correct the books where necessary, assuming that the $2023$ books have not been closed. Assume that the change from FIFO to weighted average cost can be justified as resulting in more relevant financial information. Disregard the effects of the corrections on income tax.

b$.$ Identify the type of change for each of the six items.

c$.$ Redo part $($a$)$ but include the effects of income tax, assuming the company has a tax rate of $25\%.$