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Solarcon ( Pty ) Ltd provides customers with air conditioners, including installation and maintenance. During the December 2 0 2 3 financial year - end,

Solarcon (Pty) Ltd provides customers with air conditioners, including installation and
maintenance. During the December 2023 financial year-end, the board of directors
held a meeting where it was decided to change the accounting policy with respect to
Solarcon (Pty) Ltds inventory valuation.
Previously, air conditioner inventory was valued according to the weighted average
method but should now be valued according to the first-in-first-out method. The new
valuation method will ensure a more reliable value of Solarcon (Pty) Ltds inventory.
The change in accounting policy has not yet been accounted for in the 31 December
2023 financial records.
Below are the values of inventory based on the two valuation methods:
2023202220212020
First in first out method 525000470000440000430000
Weighted average method 470000445000431000415000
The South African Revenue Services will not re-open the previous years assessments
but will accept the new policy for tax purposes for the current year. Assume an income
tax rate of 27% is applicable for all years.
2.1 Briefly discuss whether Solarcon (Pty) Ltd will be allowed to change its inven-
tory accounting policy as decided by the board of directors. Your answer should
comply with International Financial Reporting Standards.
(5 marks)
2.2 Prepare the general journal entries required in the records of Solarcon (Pty) Ltd
for the 31 December 2022 financial year to account for the change in account-
ing policy. Journal dates and narrations are not required. Round all amounts to
the nearest Rand.
(10 marks)
2.3 Prepare the general journal entries required in the records of Solarcon (Pty) Ltd
for the 31 December 2023 financial year to account for the change in account-
ing policy. Journal dates and narrations are not required. Round all amounts to
the nearest Rand.
(10 marks)
2.4 Disclose the change in accounting policy note in the financial statements of
Solarcon (Pty) Ltd for the year ended 31 December 2023 to be in accordance
with the International Financial Reporting Standards. Comparative figures are
required.
(15 marks)

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