A business statement of profit or loss and other comprehensive income for the year ended 31 December 20X6 showed a net profit of $20,900. It was later found that $4,500 paid for the purchase of a motor van had been debited to motor expenses account. It is the company’s policy to depreciate motor vans at 25 per cent per year, with a full year’s charge in the year of acquisition.
What would the net profit be after adjusting for this error?
Answer
| $ | |
| Draft net profit | 20,900 |
| Add: purchase price | 4,500 |
| Less: additional depreciation (4,500 x 25%) | (1,125) |
| Adjusted profit | 24,275 |