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28. A manufacturing company receives an invoice on 29 February 2002 for work done on one of its machines. $25,500 of the cost is actually for a machine upgrade which will improve its efficiency.
The accounts department do not notice and charge the whole amount to maintenance costs. Machinery is depreciated at 25% per annum on a straight line basis, with a proportional charge in the years of acquisition and disposal.
By what amount with the profit for the year to 30 June 2002 be understated?
$23,375
$25,500
$27,625
$19,125Please show working!
Answer should be 23,375.
Help me check the answers.
If the answer is correct then I provide the workings.
yes this is the good ans
calculation:
depreciation: 4/12*25%*25500 ( it is 4months use only 29feb02-30june02)
then you must take 25500-the depreciation because a capital expenditure has been charges as a revenue expenditure which will therefore decrease profits
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