MLM Bhd started operations on 1 January 2015 and has used the FIFO method of inventory valuation since its operation. In 2018, the company decides to switch to the average cost method. The following table presents the effects of the change in inventory valuation method: Net Income Retained Earnings (ending balance) Year FIFO Average Cost FIFO RM RM RM 2015 175,000 157,000 260,000 2016 205,000 210,000 575,000 2017 300,000 293,000 590,000 2018 305,000 620,000 780,000 REQUIRED: Restate the beginning retained earnings balance as at 1 January 2018. Explain the accounting treatment for prior period errors in accordance to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors. Briefly explain the accounting treatment for adjusting events and non-adjusting events after the reporting period in accordance to MFRS 110 Events After the Reporting Period.
MLM Bhd started operations on 1 January 2015 and has used the FIFO method of inventory valuation since its operation. In 2018, the company decides to switch to the average cost method. The following table presents the effects of the change in inventory valuation method: Net Income Retained Earnings (ending balance) Year FIFO Average Cost FIFO RM RM RM 2015 175,000 157,000 260,000 2016 205,000 210,000 575,000 2017 300,000 293,000 590,000 2018 305,000 620,000 780,000 REQUIRED: Restate the beginning retained earnings balance as at 1 January 2018. Explain the accounting treatment for prior period errors in accordance to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors. Briefly explain the accounting treatment for adjusting events and non-adjusting events after the reporting period in accordance to MFRS 110 Events After the Reporting Period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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MLM Bhd started operations on 1 January 2015 and has used the FIFO method of
|
|
Net Income |
(ending balance) |
|
|
Year |
FIFO |
Average Cost |
FIFO |
|
|
RM |
RM |
RM |
|
2015 |
175,000 |
157,000 |
260,000 |
|
2016 |
205,000 |
210,000 |
575,000 |
|
2017 |
300,000 |
293,000 |
590,000 |
|
2018 |
305,000 |
620,000 |
780,000 |
REQUIRED:
- Restate the beginning retained earnings balance as at 1 January 2018.
- Explain the accounting treatment for prior period errors in accordance to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors.
- Briefly explain the accounting treatment for adjusting events and non-adjusting events after the reporting period in accordance to MFRS 110 Events After the Reporting Period.
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