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Q19.1 Shuswap
Please sir, I didn’t understand how the adjustments on depreciation was done?
$350000 was substrated from depreciation of plant and equipment and added to retained earnings.Because there had been no entries for the sale of the plant (note 5(b) of the question), depreciation will have been calculated as though there had not been a sale – i.e. on the cost of all the plant ignoring the sale.
However, they had sold some that had originally cost 1,400,000. So there should not have been any depreciation on them. The depreciation would have been 25% x 1,400,000 = 350,000.
So….that needs removing from the existing depreciation charge.
I hope that makes sense 🙂
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