Answer
a.The changes in depreciation should be captured for the current period and other forthcoming periods. The deprecation amount should not be net of tax.
b. The $1,600,000 flood-related loss should be put under the "Other Expenses and Losses" category. The amount is not affected by taxes.
c. The inventory accounts should be changed for the current and forthcoming reporting periods.
d. The amount that was wrongly expensed should be treated as an adjustment for the prior period. Accordingly, the previous year’s income will need to be restated to ensure that the error is corrected.
e. The income for the previous year should be recast to reflect the FIFO methodology of inventory valuation.
Work Step by Step
a.The changes in depreciation should be captured for the current period and other forthcoming periods. The deprecation amount should not be net of tax.
b. The $1,600,000 flood-related loss should be put under the "Other Expenses and Losses" category. The amount is not affected by taxes.
c. The inventory accounts should be changed for the current and forthcoming reporting periods.
d. The amount that was wrongly expensed should be treated as an adjustment for the prior period. Accordingly, the previous year’s income will need to be restated to ensure that the error is corrected.
e. The income for the previous year should be recast to reflect the FIFO methodology of inventory valuation.
