6. Peter M. Dell Co. purchased equipment for $ 469,200, which was estimated to have a useful life of 10 years with a residual value of $ 9,200 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2020, it is determined that the total estimated life should be 15 years with a residual value of $ 4,600 at the end of that time.

Prepare the entry (if any) to correct the prior years depreciation.

7. The first audit of the books of Gomez Limited was recently carried out for the year ended December 31, 2020. 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:

1.		At the beginning of 2018, the company purchased a machine for $ 456,000 (residual value of $ 30,600) that had a useful life of 6 years. The bookkeeper used straight-line depreciation, but failed to deduct the residual value in calculating the depreciation base for the three years.
2.		At the end of 2019, the company accrued sales salaries of $ 50,000 in excess of the correct amount.
3.		A tax lawsuit that involved the year 2018 was settled late in 2020. It was determined that the company owed an additional $ 83,000 in tax related to 2018. The company did not record a liability in 2018 or 2019, because the possibility of losing was considered remote. The company charged the $ 83,000 to retained earnings in 2020 as a correction of a prior years error.
4.		Gomez purchased another company early in 2016 and recorded goodwill of $ 502,000. Gomez amortized $ 25,100 of goodwill in 2016, and $ 50,200 in each subsequent year. The tax treatment for goodwill was properly applied.
5.		In 2020, the company changed its basis of inventory costing from FIFO to weighted average cost. The changes cumulative effect was to decrease net income of prior years by $ 47,500. 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 2020.
6.		In 2020, the company wrote off $ 66,000 of inventory that it discovered, in 2020, had been stolen from one of its warehouses in 2019. This loss was charged to the Loss on Impairment account in 2020.

Prepare the journal entries in 2020 to correct the books where necessary, assuming that the 2020 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.

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

Prepare the journal entries in 2020 to correct the books where necessary, assuming that the 2020 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. Include the effects of income tax, assuming the company has a tax rate of 15%.

8. For each of the following situations, identify whether the change (or correction) should be made prospectively or retrospectively.

9. Golden Properties Corporation purchased a parcel of land in March 2019 for $3.10 million with the intent to construct a building on the property in the near future. At the time of purchase, Golden applied the cost model and measured and reported the land at its acquisition cost as allowed in IAS 16. Golden follows IFRS. Management decided in 2020 that the land qualifies as an investment property under IAS 40 and that Golden is to apply the fair value model of accounting for investment properties effective immediately because management believes that changing the measurement model will provide more relevant information. Independent appraisals indicate that the lands fair value at December 31, 2019 and 2020, was $3,080,000 and $3,168,000, respectively. Before application of the fair value model of accounting for investment properties, Goldens reported net income for the years ended December 31, 2018, 2019, and 2020, was $73,000, $41,000, and $12,000, respectively; and Goldens reported retained earnings at December 31, 2018, 2019, and 2020, was $189,000, $254,000, and $266,000, respectively. Golden has 100,000 common shares outstanding. Answer the following, ignoring income tax considerations.

Prepare the original comparative SFP as at December 31, 2019, and the original comparative income statement for the year ended December 31, 2019, for the affected accounts.

10. On May 5, 2021, you were hired by Gavin Inc., a closely held company that follows ASPE, as a staff member of its newly created internal auditing department. While reviewing the companys records for 2019 and 2020, you discover that no adjustments have yet been made for the items listed below.

1.

Interest income of $ 22,560 was not accrued at the end of 2019. It was recorded when received in February 2020.

2.

Equipment costing $ 21,600 was expensed when purchased on July 1, 2019. It is expected to have a four-year life with no residual value. The company typically uses straight-line depreciation for all fixed assets.

3.

Research costs of $ 43,200 were incurred early in 2019. They were capitalized and were to be amortized over a three-year period. Amortization of $ 14,400 was recorded for 2019 and $ 14,400 for 2020. For tax purposes, the research costs were expensed as incurred.

4.

On January 2, 2019, Gavin leased a building for five years at a monthly rental of $ 10,800. On that date, Gavin paid the following amounts, which were expensed when paid for both financial reporting and tax purposes:

Security deposit		$ 42,000
First months rent		10,800
Last months rent		10,800
		$ 63,600

5.

The company received $ 50,400 from a customer at the beginning of 2019 for services that it is to perform evenly over a three-year period beginning in 2019. None of the amount received was reported as unearned revenue at the end of 2019. The $ 50,400 was included in taxable income in 2019.

6.

Merchandise inventory costing $ 20,160 was in the warehouse on December 31, 2019, but was incorrectly omitted from the physical count at that date. The company uses the periodic inventory method.

Gavin follows the taxes payable method of accounting for income taxes. Enter the appropriate dollar amounts in the appropriate columns to indicate the effect of any errors on the net income figure reported on the income statement for the year ended December 31, 2019, and the retained earnings figure reported on the statement of financial position at December 31, 2020. Assume that all amounts are material and that an income tax rate of 25% is appropriate for all years. Assume also that each item is independent of the other items. It is not necessary to total the columns on the grid.