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Question 3 Hannam Co decided to cha effective 1 January 2019. This change will be imp annam co decided to change from the declining balance method of depreciation to the strani ne mere wary 2015This change will be implemented retrospectively. The following information was provide Year 2015* 2016 2017 2018 Net Income as Reported $(29.100) 28.700 18.200 42.500 Excess of Declining-Balance Depreciation over straight-Line Depreciation $ 4,200 12.600 10.500 5.900 "First year of operations The company has a Dec 31 year-end. The tax rate is 20%. No dividends were declared until 2019. $19,600 of dividends were declared and paid in Dec 2019. Income for 2019, calculated using the new accounting policy, was $103,200. Required: a) Calculate the earnings correction that Hannam Co. must show in the 2019 financial statements. b) Prepare the 2019 entry to record the change in accounting policy General Journal Account Titles and Explanation Date Debit Credit c) Present the retained earnings reconciliation that would appear on Hannam's statement of changes in equity.

Answer 1

a)
Year	Net income as reported	excess of declining balance depreciation over straight line
2015	$                               -29,100	$                                                                                                            4,200
2016	$                                 28,700	$                                                                                                          12,600
2017	$                                 18,200	$                                                                                                          10,500
2018	$                                 42,500	$                                                                                                            5,900
Total net increase in income	$                                 60,300	$                                                                                                          33,200
Tax payable @ 20%		$                                                                                                            6,640
Net increase in retained earnings		$                                                                                                          26,560
b)	journal entry
date	account titles	debit	credit
31-12-2019	Assets	$                                                                                                          33,200
	Tax payable		$           6,640
	Retained earnings		$         26,560
		$                                                                                                          33,200	$         33,200
c)
II. Other Equity
Particulars	Notes		Total
		Reserves & Surplus -Retained earnings
Balance as at 01/04/16		$                                                                                                    60,300.00	$    60,300.00
Profit for the year		$                                                                                                 1,03,200.00	$1,03,200.00
Prior period adjustment		$                                                                                                    26,560.00	$    26,560.00
Other comprehensive income		$                                                                                                                   -	$                   -
Dividends paid	2	$                                                                                                   -19,600.00	$ -19,600.00
Balance at 31/03/17		$                                                                                                 1,70,460.00	$1,70,460.00