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Problem 1 In 20x6, after the financial statements for 20x5 were published, it was discovered that equipment costing $200,000,

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Answer #1

Date of Purchase of the equipment -: Jan 2, 2004

Cost of the equipment -: $200,000

Useful life -: 8 years

Life elapsed -: 2 years

Residual Value -: Nil

Depreciation that should have been charged -: ($200,000 - 0) / 8 years

= $50,000

Journal entry to be passed at the beginning of year 2006

Other equity A/c Dr. $50,000

To Accumulated depreciation $50,000

(Being prior period error corrected after identification w.e.f Jan 1, 2006)

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