The founder, president, and major shareholder of Pharoah Corp. recently sold his controlling interest in the company to a national

distributor in the same line of business. The change in ownership was effective June $30,2023,$ halfway through Pharoah's current

fiscal year.

During the due diligence process of acquiring the company and over the last six months of $2023,$ the new senior management team

had a chance to review the company's accounting records and policies. Pharoah follows ASPE. Although EPS is not part of ASPE,

management calculates EPS for its own purposes and applies the IFRS guidelines. By the end of $2023,$ the following decisions had beer

made:

Pharoah's policy of expensing all interest as incurred will be changed to correspond to the policy of the controlling

shareholder whereby interest on self$-$constructed assets is capitalized. This policy will be applied retrospectively, and going

forward it will simplify the consolidation process for the parent company. The major effect of this policy is to reduce interest

expense in $2021$ by $$9,850$ and to increase the cost of equipment by the same amount. The equipment was put into service

early in $2022.$ Pharoah uses straight$-$line depreciation for equipment and a five$-$year life. Because the interest has already

been deducted for tax purposes, the change in policy results in a taxable temporary difference.

Deferred development costs of $$12,600$ remained in long$-$term assets at December $31,2022.$ These were being written off

on a straight$-$line basis with another three years remaining at that time. On reviewing the December $31,2023$ balances $($after

an additional year of depreciation$),$ management decided that there were no further benefits to be received from these

deferrals and there likely had not been any benefits for the past two years. The original costs were tax deductible when

incurred.

A long$-$term contract with a preferred customer was completed in December $2023.$ When discussing payment with the

customer, it came to light that a down payment of $$34,000$ the customer made on the contract at the end of $2021$ had been

taken into revenue when received. The revenue should have been recognized in $2023$ on completion of the contract.

Pharoah's financial statements $($summarized$)$ were as follows at December $31,2022$ and $2023,$ before any corrections related to the

information above. The December $31,2023$ statements are in draft form only and the $2023$ accounts have not yet been closed.Prepare any December $31,2023$ journal entries needed to put into effect the decisions made by senior management. Where

retrospective adjustments are made, record the journal entry to include the effect of income taxes. $($List all debit entries before

credit entries. 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 $0$ for the amounts.$)$

No$.$

Account Titles and Explanation

Debit

Credit

Item#$1$

$($To record effect of change in accounting policy$)$

$($To record expenses related to change in accounting policy$)$

Item #$2$

$($To correct for error$)$

$($To record taxes on correction of error$)$

Item #$3$

$($To correct for error$)$

$($To record taxes on correction of error$)$