Reference no: EM132943763
ABC Company shows its income statement for 2019 and 2020
2020 2019
Sales 800,000 900,000
Cost of goods sold (320,000.00) (360,000.00)
Gross profit 480,000.00 540,000.00
Operating expenses (192,000.00) (216,000.00)
Net income before tax 288,000.00 324,000.00
Net income after tax 201,600.00 226,800.00
Income tax expense (30%)
(86,400.00) (97,200.00)
The income statement above is computed based on FIFO method. In 2020, the entity revised its costing method from FIFO to Weighted average method. The 2018 and 2020 inventory under FIFO is greater than that of Weighted average method by Php20,000r and Php30,000, respectively. In 2019 inventory under weighted average is greater than that of FIFO method by Php15,000.
Problem 1: How much is the net effect on retained earnings caused by the change in accounting policy
Option 1: 24,500.00
Option 2: 45,000.00
Option 3: 35,000.00
Option 4: 31,500.00
Option 5: None of the choices
Problem 2: How much is the net income after tax in 2020?
Option 1: 170,100.00
Option 2: 191,100.00
Option 3: 233,100.00
Option 4: 212,100.00
Option 5: None of the choices