Bennett Corp., which began operations in January 2011, follows IFRS and is subject to a 30% income tax rate. In 2014, the following events took place:
1. The company switched from the zero-profit method to the percentage-of-completion method of accounting for its long-term construction projects. This change was a result of experience with the project and improved ability to estimate the costs to completion and therefore the percentage complete.
2. Due to a change in maintenance policy, the estimated useful life of Bennett's fleet of trucks was lengthened.
3. It was discovered that a machine with an original cost of $100,000, residual value of $10,000, and useful life of four years was expensed in error on January 23, 2013, when it was acquired. This situation was discovered after preparing the 2014 adjusting entries but prior to calculating income tax expense and closing the accounts. Bennett uses straight-line depreciation and takes a full year of depreciation in the year of acquisition. The asset's cost had been appropriately added to the CCA class in 2013 before the CCA was calculated and claimed.
4. As a result of an inventory study early in 2014 after the accounts for 2013 had been closed, management decided that the weighted average costing formula would provide a more relevant presentation in the financial statements than does FIFO costing. In making the change to weighted average cost, Bennett determined the following:

Instructions
(a) Analyze each of the four 2014 events described above. For each event, identify the type of accounting change that has occurred, and indicate whether it should be accounted for with full retrospective application, partial retrospective application, or prospectively.
(b) Prepare any necessary journal entries that would be recorded in 2014 to account for events 3 (ignore taxes) and 4.

Transcribed Image Text:

InventoryWeighted Average Cost Date Dec. 31, 2013 Dec. 31, 2011 Inventory -FIFO Cost $90,000 130,000 200,000 80,000 100,000 150,000