Question 3: Woo Ltd. recently conducted an extensivereview of its accounting and reporting policies. The followingaccounting changes are an outgrowth of that review: 1. Woo acquireda machine at a cost of $400,000 in 2016. The machine has beendepreciated on a straight-line basis with no residual value sinceit was acquired. During 2019, it was decided that the benefits fromthe machine would be consumed over a total of 13 years rather thanthe 20-year useful life now being used to depreciate its cost. 2.At the beginning of 2019, Woo changed its method of valuinginventory from the FIFO cost method to the weighted-average costmethod. At December 31, 2018 and 2017, Woo’s inventories were asfollow: 2018 2017 On a FIFO cost basis $560,000 $540,000 On aweighted-average cost basis $500,000 $490,000 3. Woo‘s income taxrate is 20%. 4. Woo reports net income for 2019 and 2018 for thefollowing amounts: 2019 2018 Net income $840,000 $900,000 5. Theretained earnings of Woo as at December 31, 2018 and 2017 beforeadjusting the effect from the changes in inventory valuation methodare as follow: 2018 2017 Retain earnings $3,200,000 $2,800,000 6.Dividends declared during 2019 and 2018 were $100,000 and $500,000,respectively. Required: a. Prepare the journal entries needed in2019 related to each change. [10 marks] b. Prepare the statementsof changes in equity (in part) for the year ended at 31 December2019 after the adjustments (including comparative figure for 2018)in accordance with HKAS 8. [10 marks]
