Merrick Inc. follows IFRS and is adjusting and correcting its books at the end of 2020. In reviewing its records, the following information has been compiled: 

1. In 2020, the depreciation method on plant assets should be changed from sum-of-the-years'-digits to the straight-line method due to a change in pattern of usage. The assets were purchased at the beginning of 2019 for $90,000 with an estimated useful life of four years and no residual value. Merrick has already recorded 2020 depreciation expense of $27,000 related to the assets, using the sum-of-the-years'-digits method. 

2. Ending inventory for 2019 was overstated by $20,000; ending inventory for 2020 is correctly stated. 

3. The adjusted trial balance at December 31, 2018, includes the following amounts: Cash $38,000; Inventory $112,000; Accounts Payable $48,000; Retained Earnings $72,000. 

4. Dividends of $30,000 and $25,000 were declared and paid on December 31, 2020, and December 31, 2019, respectively. 

5. Share capital of $30,000 consists of 20,000 common shares outstanding since the company's inception. Merrick's statement of financial position and income statement are as follows at December 31, 2019 and 2020, before any corrections related to the information above. The December 31, 2020 statements are in draft form only and the 2020 accounts have not yet been closed. 

Instructions 

a. Prepare the comparative income statement and comparative statement of changes in equity for 2020, and the comparative statement of financial position as at December 31, 2020. Ignore income tax effects. Do not prepare notes to the financial statements. Round earnings per share to the nearest cent. 

b. Identify other possible accounting treatments for the change in depreciation method under alternative circumstances.

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Merrick Inc. Statement of Financial Position As at December 31, 2020 Assets 2020 2019 Cash $ 60,000 $ 34,000 Inventory 107,000 128,000 Plant assets, net 27,000 54,000 Total assets $194,000 $216,000 Liabilities and Shareholders' Equity Accounts payable $ 17,000 $ 61,000 Share capital Retained earnings Total liabilities and shareholders' equity 30,000 30,000 147,000 125,000 $194,000 $216,000 Merrick Inc. Income Statement Year Ended December 31, 2020 2019 $270,000 2020 Sales $340,000 Cost of goods sold 200,000 142,000 Gross profit 140,000 128,000 Operating expenses 88,000 50,000 Net income $ 52,000 $ 78,000