5) During 2023, Tori Company decided to change from the FIFO inventory valuation to the weighted average

method. The income tax rate is 30%.

FIFO Weighted average

January 1 inventory 7,500,000 8,300,000

December 31 inventory 8,000,000 8,500,000

What amount should be reported as the cumulative effect of this accounting change for 2023?

A. 560,000 increase B. 560,000 decrease C. 350,000 increase D. 350,000 decrease

6) After the issuance of the 2023 financial statements, Orange Company discovered a computational error of

P400,000 in the calculation of the December 31, 2023 inventory. The error resulted in a P400,000

overstatement in the cost of goods sold for the year ended December 31, 2023. In October 2024, Orange

paid the amount of P900,000 in settlement of litigation instituted against it during 2023. The income tax rate

is 30%. What is the adjustment of the retained earnings on January 1, 2024 as a result of prior period errors?

A. 400,000 credit B. 280,000 credit C. 350,000 debit D. 630,000 debit