Seaspray Limited sells a range of electrical products through its retail outlets throughout Australia. Up until 30 June 2021 Seaspray Limited had been incorrectly valuing inventories using the LIFO method. In July 2021 the management of Seaspray Limited discovered that LIFO is not an acceptable method of assigning inventory cost and therefore now intends to use the FIFO method to value inventory.

The following extracts of Seaspray Limiteds most recent financial statements before the application of the FIFO method are shown below.

Statement of Financial Position as at 30 June 2021

	2021	2020
Current Assets
Cash	9,000	7,000
Receivables	6,000	8,000
Inventory	4,000	6,000
	19,000	21,000

Statement of Profit and Loss and other Comprehensive Income for year ending 30 June 2021

	2021	2020
Cost of Sales
Opening Inventory	6,000	2,000
Purchases	26,000	27,000
Closing Inventory	(4,000)	(6,000)
	28,000	23,000

Statement of Changes in Equity for year ending 30 June 2021

	2021	2020
Retained Earnings
Opening Reserves	52,000	43,000
Net Profit	29,000	23,000
Dividends	(14,000)	(14,000)
Closing Reserve	67,000	52,000

Management estimates that the value of its inventory (as at 30 June each year) using the FIFO method would be as follows:

	2021	2020	2019
Inventory	5,500	8,000	5,000

Required:

Note: Show all workings: If you get the wrong answer without workings, it is very difficult to get any marks for your attempt. Therefore, it is extremely important to show all working so that marks can be allocated for incorrect answers.

1. Using the above format and considering AASB 108 prepare:

• a draft extract of Current Assets that would be included in the Statement of Financial Position;
• the Cost of Goods Sold section of the Profit and Loss Statement; and
• the make-up of the Retained Earnings section of Shareholders Funds;

for 2020 and 2021 to account for the switch from the LIFO method to the FIFO method of accounting for inventory.

(b) In the case of Seaspray Limited, would the adjustments to the financial statements be classified as a retrospective application or a retrospective restatement? In explaining your answer distinguish between a retrospective application and a retrospective restatement