Reference no: EM133085124
Questions -
A. On January 1, 2016, ARIS Company bought a machine for P1,500,000. At that time, this machine had an estimated useful life of six years, with no residual value. As a result of additional information, ARIS determined on January 1, 2019, that the machine had an estimated useful life of eight years from the date it was acquired, with no residual value. Accordingly, the appropriate accounting change was made in 2019. ARIS Company uses the straight line method of depreciation.
Q1. What is the amount of the depreciation for the year 2019?
Q2. What would be the book value of the machine on December 31, 2019?
B. GOLDEN Company had used the FIFO method of inventory valuation since it began operations in 2016. GOLDEN decided to change to the weighted average method for determining inventory costs at the beginning of 2019. The following schedule shows year-end inventory balances under the FIFO and weighted average method:
|
Year
|
FIFO
|
Weighted Average
|
|
2016
|
4,500,000
|
5,400,000
|
|
2017
|
7,800,000
|
7,100,000
|
|
2018
|
8,300,000
|
7,800,000
|
What amount, before income tax, should be reported in the 2019 statement of retained earnings as the cumulative effect of the change in accounting policy? Indicate: Increase or Decrease.