IFRS

The X Company is having its first ever audit of its books for the year ended December 31, 2019. The X Company follows IFRS. In examining the books the auditor found that certain items has been overlooked or might have been incorrectly handled in the past. At the beginning of 2018, the company purchased a machine for $450,000 (residual value $30,000) that had a useful life of six years. The bookkeeper used straight line depreciation, but failed to deduct the residual value in calculating the depreciation base for the three years. (5 marks). At the end of 2019, the company accrued sales salaries of $47,000 in excess of the correct amount (1 mark). A tax lawsuit that involved the 2018 year was settled in 2020. It was determined that the company owed an additional $81,000 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 $81,000 to retained earnings in 2020 as a correction of a prior year's error. X Company purchased another company early in 2017 and recorded goodwill of $500,000. X Company amortized $25,000 of goodwill in 2017 and $50,000 in each subsequent years. In 2020 the company changed its basis of inventory costing from FIFO to weighted average cost. The change's cumulative effect was to decrease net income of prior years by $45,000. The company debited this cumulative effect to Retained Earnings and recorded the related income tax effect. The weighted average cost formulated was used in calculating income for 2020. In 2020 the company wrote off $63,000 of inventory that it discovered in 2019 had been stolen from one of its warehouses in 2019. The loss was charged to a loss account in 2019. Required:- Prepare the journal entries in 2020 to correct the books where necessary assuming that the 2019 books have not yet been closed. Assume that the change from FIFO to weighted average cost can be justified as resulting in more financial information. Disregard the effects of the correction on income taxes