A business purchased a motor car on 1 July 20OX3 for $20,000. It is to be depreciated at 20 per cent per year on the straight line basis, assuming a residual value at the end of five years of $4,000, with a proportionate depreciation charge in the years of purchase and disposal. The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles repairs account. How will the business profit for the year ended 31 December 20X3 be affected by the error? Understated by $18,400 Understated by $16,800 Overstated by $18,400 Overstated by $16,800 (2 marks) ABCD

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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per year on the straight line basis, assuming a residual value at the end of five years of $4,000, with a
proportionate depreciation charge in the years of purchase and disposal.
A business purchased a motor car on 1 July 20X3 for $20,000. It is to be depreciated at 20 per cent
The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles
repairs account.
How will the business profit for the year ended 31 December 20X3 be affected by the error?
Understated by $18,400
Understated by $16,800
Overstated by $18,400
Overstated by $16,800
A
C
(2 marks)
Transcribed Image Text:.8 per year on the straight line basis, assuming a residual value at the end of five years of $4,000, with a proportionate depreciation charge in the years of purchase and disposal. A business purchased a motor car on 1 July 20X3 for $20,000. It is to be depreciated at 20 per cent The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles repairs account. How will the business profit for the year ended 31 December 20X3 be affected by the error? Understated by $18,400 Understated by $16,800 Overstated by $18,400 Overstated by $16,800 A C (2 marks)
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