Solarcon ( Pty ) Ltd provides customers with air conditioners, including installation and maintenance. During the December
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Question:
Solarcon Pty Ltd provides customers with air conditioners, including installation and
maintenance. During the December financial yearend, 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 firstinfirstout 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 December
financial records.
Below are the values of inventory based on the two valuation methods:
First in first out method
Weighted average method
The South African Revenue Services will not reopen the previous years assessments
but will accept the new policy for tax purposes for the current year. Assume an income
tax rate of is applicable for all years. Prepare the general journal entries required in the records of Solarcon Pty Ltd
for the December financial year to account for the change in accounting policy. Journal dates and narrations are not required. Round all amounts to
the nearest Rand.
Related Book For
Auditing The Art and Science of Assurance Engagements
ISBN: 978-0133405507
13th Canadian edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones
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