Question 2 Kimmel Instrument Corporation, a company that follows IFRS, recently concluded that the company's results of operations will be reliable and more relevant in future years if Kimmel changes its method of costing inventory from FIFO to weighted average cost. The following data are a five-year income summary using FIFO and a schedule of what the inventories might have been if they had been using the weighted average cost method. KIMMEL INSTRUMENT CORPORATION Statement of Income and Retained Earnings for the Years Ended May 31 2013 2014 2015 2016 2017 Sales-net $13,964 $15,506 $16,673 $18,221 $18,898 Cost of goods sold Beginning inventory 1,000 1,100 1,000 1,115 1,237 Purchases 13,000 13,900 15,000 15,900 17,100 Ending inventory (1.100) (1.000) (1.115) (1.237) (1.369) Total 12.900 14.000 14.885 15,778 16,968 Gross profit 1,064 1,506 1,788 2,443 1,930 Administrative expenses 700 763 832 907 989 Income before taxes 364 743 956 1,536 941 Income taxes (30%) 109 223 287 461 282 Net income 255 520 669 1,075 659 Retained earnings-beginning 1,206 1,461 1,981 2,650 3,725 Retained earnings-ending $ 1.461 $ 1.981 $ 2,650 $ 3.725 $ 4.384 KIMMEL INSTRUMENT CORPORATION Schedule of Inventory Balances Using Average Cost Method Year Ended May 31 2012 2013 2014 2015 2016 2017 $950 $1,124 $1,091 $1,270 $1,480 $1,699 Required: a) Prepare the journal entry that the company would record at May 31, 2017 ifit decided to change from FIFO to the average cost method. b) Following the format above, prepare the cost of Goods Sold section of the comparative income statements for 2016 and 2017 assuming that Kimmel had changed its inventory costing method to weighted average cost in 2017. c) Prepare a calculation of corrected retained earnings for 2017 and 2016. d) Identify all statement of financial position accounts that require restatement e) Assume that the data for the years 2012 to 2016 were not available. Briefly explain how to account for this change under both ASPE and IFRS. Question 2 Kimmel Instrument Corporation, a company that follows IFRS, recently concluded that the company's results of operations will be reliable and more relevant in future years if Kimmel changes its method of costing inventory from FIFO to weighted average cost. The following data are a five-year income summary using FIFO and a schedule of what the inventories might have been if they had been using the weighted average cost method. KIMMEL INSTRUMENT CORPORATION Statement of Income and Retained Earnings for the Years Ended May 31 2013 2014 2015 2016 2017 Sales-net $13,964 $15,506 $16,673 $18,221 $18,898 Cost of goods sold Beginning inventory 1,000 1,100 1,000 1,115 1,237 Purchases 13,000 13,900 15,000 15,900 17,100 Ending inventory (1.100) (1.000) (1.115) (1.237) (1.369) Total 12.900 14.000 14.885 15,778 16,968 Gross profit 1,064 1,506 1,788 2,443 1,930 Administrative expenses 700 763 832 907 989 Income before taxes 364 743 956 1,536 941 Income taxes (30%) 109 223 287 461 282 Net income 255 520 669 1,075 659 Retained earnings-beginning 1,206 1,461 1,981 2,650 3,725 Retained earnings-ending $ 1.461 $ 1.981 $ 2,650 $ 3.725 $ 4.384 KIMMEL INSTRUMENT CORPORATION Schedule of Inventory Balances Using Average Cost Method Year Ended May 31 2012 2013 2014 2015 2016 2017 $950 $1,124 $1,091 $1,270 $1,480 $1,699 Required: a) Prepare the journal entry that the company would record at May 31, 2017 ifit decided to change from FIFO to the average cost method. b) Following the format above, prepare the cost of Goods Sold section of the comparative income statements for 2016 and 2017 assuming that Kimmel had changed its inventory costing method to weighted average cost in 2017. c) Prepare a calculation of corrected retained earnings for 2017 and 2016. d) Identify all statement of financial position accounts that require restatement e) Assume that the data for the years 2012 to 2016 were not available. Briefly explain how to account for this change under both ASPE and IFRS