Answered: What is the impact of the error in 2022…

Business

Accounting

What is the impact of the error in 2022 net income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Hardy Man, Inc. incurred repair costs of a machine in 2021 for P 30,000 and erroneously capitalized the cost to machinery account. The company's policy would have called for the depreciation of the asset over its estimated useful life of five years with a 10% salvage value by the straight-line method. Hardy Man's policy is to take one half year's depreciation in the year of acquisition and one-half in the year of disposal. QUESTION: What is the impact of the error in 2022 net income?

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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On July 1, 2019, Nuuty Inc., a calendar-year company, purchased a machine for a cash price of P800,000, with an estimated useful life of 10 years and estimated residual value of P70,000. The company uses double declining balance method. It is the company’s policy to depreciate its assets to the nearest month.During 2021, P131,500 was spent on an upgrade to the machine in order to improve its efficiency and increase the inflow of economic benefits over the machine’s remaining life. In addition, management decided to change to the straight-line method of depreciation, maintaining its residual value of P70,000. What is the revised depreciation expense for the year ended December 31, 2021?
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Dd.62.
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