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In 2020, America Technologies discovered that certain items had been included in the inventory at 31 st December 2019 valued at P4.2 million, which had

In 2020, America Technologies discovered that certain items had been included in the inventory at 31st December 2019 valued at P4.2 million, which had in fact been sold before the year end. Below are the figures for 2019 (as reported) and 2020 (draft).

2019 2020

P000 P000

Sales 47,400 67,200

Cost of goods sold (34,570) (55,800)

Profit before taxation 13,030 11,400

Income taxes (3,880) (3,400)

Profit for the period 8,950 8,000

Retained earnings at 1st January 2020 were P13 Million. The cost of goods sold for 2020 includes the P4.2 million error in opening inventory. The income tax rate was 30% for 2019 and 2020. No dividends have been declared or paid.

  1. You are required to show the statement of profit or loss for 2020, comparative to 2019 and the retained earnings. (20 marks)
  2. Explain any TWO circumstances as outlined in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors that are justifiable reasons for a change in an accounting policy? (5 marks)

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