Question
QUESTION 1 PT ABC uses the weighted average method to calculate its inventory. In 2020, PT ABC decided to change its inventory valuation method to
QUESTION 1 PT ABC uses the weighted average method to calculate its inventory. In 2020, PT ABC decided to change its inventory valuation method to the FIFO method. Data on sales, purchases, operating costs, and cash flows from operations can be seen in the following table.
2018 | 2019 | 2020 | |
Sale | 700 millions | 650 millions | 650 millions |
Purchase | 200 millions | 200 millions | 250 millions |
Operation cost | 350 millions | 350 millions | 300 millions |
Cash flow from operations | 150 millions | 50 millions | 100 millions |
The following table shows the inventories of the two existing inventory valuation methods.
Average Cost | FIFO | Difference | |
1 January 2018 | 0 | 0 | 0 |
31 Desember 2018 | 50 millions | 55 millions | 5 millions |
31 Desember 2019 | 75 millions | 85 millions | 10 millions |
31 Desember 2020 | 95 millions | 110 millions | 15 millions |
The following table shows a comparison of COGS with the two existing methods.
Average Cost | FIFO | Difference | |
2018 | 150 millions | 145 millions | 5 millions |
2019 | 225 millions | 220 millions | 5 millions |
2020 | 230 millions | 225 millions | 5 millions |
Requested: a. What is the impact of changes in accounting policies on the company's financial statements if the tax impact is ignored? b. What is the impact of changes in accounting policies on financial statements if taxes are taken into account? 25% tax rate. c. Journalize the changes.
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