Question 3: (20 Marks)

Woo Ltd. recently conducted an extensive review of its accounting and reporting policies. The following accounting changes are an outgrowth of that review:

1. Woo acquired a machine at a cost of $400,000 in 2016. The machine has been depreciated on a straight-line basis with no residual value since it was acquired. During 2019, it was decided that the benefits from the machine would be consumed over a total of 13 years rather than the 20-year useful life now being used to depreciate its cost.

2. At the beginning of 2019, Woo changed its method of valuing inventory from the FIFO cost method to the weighted-average cost method. At December 31, 2018 and 2017, Woos inventories were as follow:

	2018	2017
On a FIFO cost basis	$560,000	$540,000
On a weighted-average cost basis	$500,000	$490,000

3. Woos income tax rate is 20%.

4. Woo reports net income for 2019 and 2018 for the following amounts:

	2019	2018
Net income	$840,000	$900,000

5. The retained earnings of Woo as at December 31, 2018 and 2017 before adjusting the effect from the changes in inventory valuation method are as follow:

	2018	2017
Retain earnings	$3,200,000	$2,800,000

6. Dividends declared during 2019 and 2018 were $100,000 and $500,000, respectively.

Required:

1. Prepare the journal entries needed in 2019 related to each change. [10 marks]

2. Prepare the statements of changes in equity (in part) for the year ended at 31 December 2019 after the adjustments (including comparative figure for 2018) in accordance with HKAS 8. [10 marks]