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Hi John. Can you please let me know how to do this question please. I have spent a long time trying to to work this out.
Co’s draft financial statements for 20X5 showed a profit of $630,000. However, the trial balance did not agree, and a suspense account appeared in the company’s financial statements.
Subsequent checking revealed the following errors:
(1) The cost of an item of plant $48,000 had been entered in the cash book and in the plant
account as $4,800. Depreciation at the rate of 10% per year ($480) had been charged.
(2) Bank charges of $440 appeared in the bank statement in December 20X5 but had not been
entered in the company’s records.
(3) One of the directors paid $800 due to a supplier in K Co’s payables ledger by a personal
cheque. The bookkeeper recorded a debit in the supplier’s ledger account but did not
complete the double entry for the transaction (K Co does not maintain a payables ledger
control account).
(4) The payments side of the cash book had been understated by $10,000.
Note: in the exam, all questions will be independent, and not based on a common scenario.What would the K Co’s profit be after the correction of the above errors?
A $634,760
B $624,760
C $624,440
D $625,240Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations.
1. The depreciation charge is wrong and correcting it will affect the profit.
2. Bank charges need entering and they will affect the profit.
3. Although this will affect the suspense account (because there has only been a debit entry) it will not affect the profit.
4. This will affect the suspense account, but will not affect the profit.
Why is the depreciation charge 4320 and why is it subtracted from the profit ?
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