Pace Instrument Corp., a small company that follows ASPE, began operations on January 1, 2017, and uses a periodic inventory system. The following net income amounts were calculated for Pace under three different inventory cost formulas: FIFO Weighted Average Cost LIFO 2017 $27.760 $24,860 $20,180 2018 30,350 26,090 21,720 2019 28,960 27,550 24.140 2020 34,250 30,640 26,270 Answer the following, ignoring income tax considerations. Assume that in 2020, Pace changed from the weighted average cost formula to the FIFO cost formula and it was agreed that the FIFO method provided more relevant financial statement information. Prepare the necessary journal entry for the change that took place during 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter for the amounts.) Assume that in 2020, Pace changed from the weighted average cost formula to the FIFO cost formula and it was agreed that the FIFO method provided more relevant financial statement information. Prepare the necessary journal entry for the change that took place during 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit List of Accounts 1. nnnnn . La 27 Assume that in 2020, Pace, which had been using the LIFO method since incorporation in 2017, changed to the FIFO cost formula in order to comply with CPA Canada Handbook, Part II, Section 3031, because LIFO is not a permitted inventory cost flow assumption under GAAP. The company applies the new policy retrospectively. Prepare the necessary journal entry for the change. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit List of Accounts -16 Joy Cunningham Co. purchased a machine on January 1, 2017 for $616,000. At that time, it was estimated that the machine would have a 10-year life and no residual value. On December 31, 2020, the firm's accountant found that the entry for depreciation expense had been omitted in 2018. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation because of a change in the pattern of the way the asset is used, starting with the year 2020. At present, the company uses the sum-of-the-years-digits method for depreciating equipment. Prepare the general journal entries that should be made at December 31, 2020, to record these events. Ignore income tax effects. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31 (To correct for the omission of depreciation expense in 2018) Dec. 31 (To record depreciation expense for 2020)
