Juniper Corporation follows IFRS. Their tax rate is 30%. A recent shift in personnel resulted in a new CFO. The CFO, Midas, suggested the following changes for the current fiscal year. On December 31, Year 2, Juniper had an outstanding accounts receivable that resulted from a sale 1.5 years ago. During October, Year 2, the customer is also bankrupt, so chances of collection are nil. Midas suggests you write off the account against Year 1 retained earnings. Midas suggests changing from double-declining to straight line depreciation. He believes it is a better reflection of the pattern of use. If SL had been used in previous years, retained earnings on December 31, Year 1, would have been $380,800 higher. The effect on Year 2 alone is a reduction in income of $48,800. For other equipment, Midas suggests using the sum of the year’s digits method. This equipment was purchased in Year 2. If the straight line method were used, the Year 2 income would be $110,000 higher. Starting January 1, Year 2, Midas decided to adopt the revaluation model for reporting and measuring land. On December 31, Year 1, the fair value was $900,000. The carrying amount for this land is $750,000. Midas suggested you look up IAS 8. Juniper owns investments classified as FVOCI. On December 31, Year 1, there was an error in the fair value calculation. The investments were overstated $200,000. Instructions For each scenario above, state if the situation is a change in policy, a correction of an error, or a change in estimate. Explain your answers. For each scenario above, state if the situation requires a restatement of the January 1, Year 2, retained earnings. If an adjustment is required, prepare the journal entry.
Juniper Corporation follows IFRS. Their tax rate is 30%. A recent shift in personnel resulted in a new CFO. The CFO, Midas, suggested the following changes for the current fiscal year.
-
On December 31, Year 2, Juniper had an outstanding
accounts receivable that resulted from a sale 1.5 years ago. During October, Year 2, the customer is also bankrupt, so chances of collection are nil. Midas suggests you write off the account against Year 1retained earnings . -
Midas suggests changing from double-declining to straight line
depreciation. He believes it is a better reflection of the pattern of use. If SL had been used in previous years, retained earnings on December 31, Year 1, would have been $380,800 higher. The effect on Year 2 alone is a reduction in income of $48,800. -
For other equipment, Midas suggests using the sum of the year’s digits method. This equipment was purchased in Year 2. If the
straight line method were used, the Year 2 income would be $110,000 higher. -
Starting January 1, Year 2, Midas decided to adopt the revaluation model for reporting and measuring land. On December 31, Year 1, the fair value was $900,000. The carrying amount for this land is $750,000. Midas suggested you look up IAS 8.
-
Juniper owns investments classified as FVOCI. On December 31, Year 1, there was an error in the fair value calculation. The investments were overstated $200,000.
Instructions
-
- For each scenario above, state if the situation is a change in policy, a correction of an error, or a change in estimate. Explain your answers.
- For each scenario above, state if the situation requires a restatement of the January 1, Year 2, retained earnings. If an adjustment is required, prepare the
journal entry .
Step by step
Solved in 5 steps with 3 images
