The first audit of the books of Gomez Limited was recently carried out for the year ended December 31, 2020. Gomez follows IFRS. In examining the books, the auditor found that certain items had been overlooked or might have been incorrectly handled in the past: 1. At the beginning of 2018, the company purchased a machine for $462,000 (residual value of $31,200) that had a useful life of 6 years. The bookkeeper used straight-line depreciation, but failed to deduct the residual value in calculating the depreciation base for the three years. 2. At the end of 2019, the company accrued sales salaries of $52,000 in excess of the correct amount 3. Atax lawsuit that involved the year 2018 was settled late in 2020. It was determined that the company owed an additional $89,000 in tax related to 2018. The company did not record a liability in 2018 or 2019, because the possibility of losing was considered remote. The company charged the $89,000 to retained earnings in 2020 as a correction of a prior year's error. 4. Gomez purchased another company early in 2016 and recorded goodwill of $518,000. Gomez amortized $25,900 of goodwill in 2016, and $51,800 in each subsequent year. The tax treatment for goodwill was properly applied. 5. In 2020, the company changed its basis of inventory costing from FIFO to weighted average cost. The change's cumulative effect was to decrease net income of prior years by $49,000. The company debited this cumulative effect to Retained Earnings, and recorded the related income tax effect. The weighted average cost formula was used in calculating income for 2020. 6. In 2020, the company wrote off $65,000 of inventory that it discovered in 2020, had been stolen from one of its warehouses in 2019. This loss was charged to the Loss on Impairment account in 2020. Part 1 Prepare the journal entries in 2020 to correct the books where necessary, assuming that the 2020 books have not been closed. Assume that the change from FIFO to weighted average cost can be justified as resulting in more relevant financial information. Disregard the effects of the corrections on income tax. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Account Titles and Explanation Debit Credit Part 2 Identify the type of change for each of the six items. Item Type of Change 1. 2. 3. 4. 5. 6.