A-LevelAccountingAccounting for non-current assets9706/12 · May/June 2023 · Q41 Mark
The financial year of a business ends on 31 December. At the beginning of the financial year, the following payments were made in respect of a new machine. $ purchase cost 60000 installation cost 10000 It was discovered that the installation cost had been incorrectly treated as an expense. It is the policy of the business to depreciate machinery at 20% per annum using the straight-line method. What was the effect of this error on the profit for the year ended 31 December?
A$8000 overstated
B$8000 understated
C$12000 overstated
D$12000 understated
✓ Correct answer
B: $8000 understated
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