HANDOUTS ON ACCOUNTING CHANGES

1. During 2017, Bukidnon Company decided to change from FIFO method of inventory valuation to the
weighted average method. Inventory balances under each method were as follows:

As of FIFO Weighted Average

January 1, 2017 P 740,000 P 700,000
December 31, 2017 830,000 780,000

Ignoring income tax, what amount should the firm report in its 2017 Statement of Changes in Equity as the
effect of the accounting change?

2. Apayao, Inc., changed from the average-cost to the FIFO cost flow assumption in 2017. The increase in the
prior year’s income before taxes is P1,200,000. Prepare Shannon’s 2017 journal entry to record the change
in accounting policy.

3. On January 1, 2014, Davao Company purchased a machine for P3,000,000 and depreciated it by the
straight–linemethod using an estimated life of 8 years with no salvage value. On January 1, 2017,
thecompany determined that the machine has a useful life of 6 years from the date of acquisition and will
have a salvage value of P240,000. An accounting change was made in 2017 to reflect these additional data.
(a) How much is the carrying amount of the machine on December 31, 2016?
(b) How much is the accumulated depreciation of the machine on December 31, 2017?
(c) How much is the carrying amount of the machine on December 31, 2018?
(d) How much is the adjustment on Accumulated Profits to effect the change in estimated useful life of the
machinery as of date of change?

4. On January 1, 2013, Guagua Company purchased for P5,000,000 a machine with a useful life of ten (10)
years and no salvage value. The machine was depreciated by the double–declining balance method. The
company shifted to the straight–line method of depreciation on January 1, 2017, disclosing in its books the
reason for the change. What should be the depreciation expense on this machine for the year ended
December 31, 2017?

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