Botticelli Inc. was organized in late 2012 to manufacture and sell hosiery. At the end of its fourth year of operation, the company has been fairly successful, as indicated by the following reported net incomes.

2012		$140,000a		2014		$205,000
2013		160,000b		2015		276,000

^a Includes a $10,000 increase because of change in bad debt experience rate. ^b Includes extraordinary gain of $30,000. The company has decided to expand operations and has applied for a sizable bank loan. The bank officer has indicated that the records should be audited and presented in comparative statements to facilitate analysis by the bank. Botticelli Inc. therefore hired the auditing firm of Check & Doublecheck Co. and has provided the following additional information.

1.		In early 2013, Botticelli Inc. changed its estimate from 2% to 1% on the amount of bad debt expense to be charged to operations. Bad debt expense for 2012, if a 1% rate had been used, would have been $10,000. The company therefore restated its net income for 2012.
2.		In 2015, the auditor discovered that the company had changed its method of inventory pricing from LIFO to FIFO. The effect on the income statements for the previous years is as follows.

		2012		2013		2014		2015
Net income unadjustedLIFO basis		$140,000		$160,000		$205,000		$276,000
Net income unadjustedFIFO basis		155,000		165,000		215,000		260,000
		$15,000		$5,000		$10,000		$(16,000)

3. In 2015, the auditor discovered that:

(a)		The company incorrectly overstated the ending inventory by $14,000 in 2014.
(b)		A dispute developed in 2013 with the Internal Revenue Service over the deductibility of entertainment expenses. In 2012, the company was not permitted these deductions, but a tax settlement was reached in 2015 that allowed these expenses. As a result of the courts finding, tax expenses in 2015 were reduced by $60,000.

(a) Indicate how each of these changes or corrections should be handled in the accounting records. (Ignore income tax considerations.)