Reference no: EM132938806
Question - DisclosureUse the following information concerning Australia Ltd for the year ending 31 December 2020
Sales $1,000,000
Cost of Goods Sold $400,000
Depreciation $300,000
Other Expenses $100,000
Profit $200,000
Required - Advice the accountant of Australia Ltd how to disclose the following items in the financial statements. In your answer, you should classify the item (change in accounting policy, change in accounting estimate or prior period error) and then outline the appropriate accounting treatment.
A) The accountant discovered that a batch of sales invoices totaling $20,000 was not processed in December 2020.
B) The company previously valued inventory using the FIFO method. During 2020 it decided to adopt the Weighted Average Costing (WACC). As a result, Cost of Goods Sold for the year increased by $50,000.
C) After reviewing the depreciation records, the company decided to revise the residual value of a building from $100,000 to $250,000. As a result, annual depreciation decreased by $15,000.