Question: Moncton Developments Ltd. decided to change from the declining-balance method of depreciation to the straight-line method effective 1 January 2019. This change will be implemented
Moncton Developments Ltd. decided to change from the declining-balance method of depreciation to the straight-line method effective 1 January 2019. This change will be implemented retrospectively. The following information was provided:
| Year | Net Income as Reported | Excess of Declining-Balance Depreciation over straight-Line Depreciation |
| ||||||
| 2015* |
| $ | (58,200) |
|
| $ | 8,400 |
|
|
| 2016 |
|
| 57,400 |
|
|
| 25,200 |
|
|
| 2017 |
|
| 36,400 |
|
|
| 21,000 |
|
|
| 2018 |
|
| 85,000 |
|
|
| 11,800 |
|
|
*First year of operations. The company has a Dec 31st year-end. The tax rate is 20%. No dividends were declared until 2019 $39,200 of dividends were declared and paid in Dec 2019. Income for 2019, calculated using the new accounting policy, was $206,400 after income tax.
Required: a) Calculate the earnings correction that Moncton Developments Ltd.. must show in the 2019 financial statements.
b) Prepare the 2019 entry to record the change in accounting policy.
| General Journal | |||
| Date | Account Titles and Explanation | Debit | Credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c) Present the retained earnings reconciliation that would appear on Moncton Developments statement of changes in equity.
|
| ||
|
| ||
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help