! pROBLEMS es f problem 11-1. (AICPA Adapted) ary 1, 2019, Black Company changed the i on i method to FIFO from LIFO for both 'ananerel cmtement and income tax reporting purposes. sl resulted in a P600,000 increase in the beginning ange pean on January 1, 2019. oring income tax, the accounting change should be Jerorted in the 2019. a. Income statement as a P600,000 debit pb. Retained earnings statement as a P600,000 debit adjustment to the beginning balance ¢. Income statement as a P600,000 credit dq. Retained earnings statement as a P600,000 credit " adjustment to the beginning balance Problem 11-2 (AICPA Adapted) During 2019, Orca Company decided to.change from the FIFO methdd of inventory valuation to the weighted average method. Inventory balances under each method were as follows: FIFO Weighted average January 1 7,200,000 7,700,000 December 31 7,900,000 8,300,000 What amount should be reported as the pretax effect of the Pane change in the statement of changes in equity for b aa addition « Sie deduction » |, 200000 addition 00,000 deduction 215Problem 11-3 (AICPA Adapted) Goddard Company had used the FIFO method of invento, valuation since it began operations in 2016. The entity deciq, to change to the weighted average method for determinin’ inventory cost at the beginning of 2019. The entity provig, the following year-end inventory balances under FIFO sat 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 pretax amount should be reported in the 2019 statement of changes in equity as the cumulative effect of the change in accounting policy? 500,000 decrease 300,000 decrease 500,000 increase 300,000 increase Problem 11-4 (AICPA Adapted) On January 1, 2019, Poe Construction Company changed to the percentage of completion method from cost recovery method of income recognition. On, December 31, 2018, the entity compiled data showing that income under the cost recovery method aggregated P7,000,000. If the percentage of completion method had been used, the accumulated income through December 31, 2018 would have been P9,000,000. The income tax rate is 30%. The cumulative effect of the accounting change should be reported in the 2019. : Retained earnings statement as P2,000,000 credit adjustment to the beginning balance. b. Income statement as P2,000,000 credit. ait c. Retained earnings statement as a P1,400,000 cre adjustment to the beginning balance. d. Income statement as a P1,400,000 credit. Boop a. 216woe problem 11-5 (IAA) Banko Construction Company has used the co method of accounting since it began operations ce recovery in 2016. In 2019, for justifiable reasons, management deci the percentage of completion method. ceided to adopt The following schedule, reporting income for the has been prepared by the entity. past 3 years, 2016 2017 2018 Total revenue from completed contracts 25,000,000 42,000,000 4 Less: Cost of completed 10,000,000 contracts 18,000,000 29,000,000 28,000,000 Income from operations 7,000,000 13,000,000 12,000,000 Casualty loss PEO 0 (2,000,000) Inch? 7,000,000 13,000,000 10,000,000 Analysis of the accounting records disclosed the following income by contracts, earned in the years 2016-2018 using the percentage of completion method. ‘ 2016 2017 2018 Contract 1 7,000,000 Contract 2 5,000,000 8,000,000 Contract 3 : 3,000,000 7,000,000 2,000,000 Contract 4 1,000,000 6,000,000 Contract 5 (1,600,000) What pretax amount should be reported as the cumulative effect of change in accounting policy in the statement of retained earnings for 2019? 4 6,000,000 b.- 8,000,000 © 7,000,000 a. 0 217| Problem 11-6 (AICPA Adapted) While preparing the financial statements for 2019 Company discovered computational errors in the Zope 2018 depreciation expense. ont These errors resulted in overstatement of each Year's; by P25,000, net of income tax. The net income for aheo 3 correctly reported at P500,000. O19 ii The following amounts were reported in the previo . financial statements: usly issued 2018 2017 Retained earnings, January 1 700,000 5 Net income 150'000 2ogee Retained earnings, December 31 850,000 700,000 What is the balance of retained earnings on De 2019? cember 31, a. 1,300,000 b. 1,350,000 ce. 1,400,000 d. 1,325,000 Problem 11-7 (IAA) Effective January 1, 2019, King Company adopted the accounting policy of expensing advertising and promotion costs when incurred. Previously, advertising and promotion costs applicable to future periods were recorded in prepaid expenses. The entity can justify the change which was made for both financial statement and income tax reporting purposes. The prepaid advertising and promotion costs totaled 600,000 on December 31, 2018. The income tax rate is 30%. ' What is the adjustment for the effect of the change accounting policy that should result in a.net charge ag income for 2019? a. 600,000 b. 180,000 c. 420,000 d. 0 218