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?

Q: What topic does this question test?

This question tests Depreciation and Non-Current Assets in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting May/June 2023 examination, Paper 1 Variant 2 (9706_s23_qp_12.pdf).

Question

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?

Oracle Prep · Accepted Answer

The correct answer is B: $8000 understated.

✓ Correct Answer

📋 Examiner Report & Trap Analysis

🎯 Mark Scheme Breakdown

Unlock the Examiner's Analysis

About This A-Level Accounting Question

Topic

Source

Practice on Oracle Prep

Related Accounting Questions