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Sarah calculated her profit for the year ended 31 December 20X8 as $70,000. During the year she acquired a machine for $20,000 and she incorrectly expensed the entire amount. It is her policy to depreciate machine at a rate of 10% straight line. What will be the effect on her net asset as at 31 December 20X9? It will understated by $18,000 It will be overstated by $2,000 It will be understated by $16,000 It will be overstated by $18,000

Sarah calculated her profit for the year ended 31 December 20X8 as $70,000. During the year she acquired a machine for $20,000 and she incorrectly expensed the entire amount. It is her policy to depreciate machine at a rate of 10% straight line. What will be the effect on her net asset as at 31 December 20X9? It will understated by $18,000 It will be overstated by $2,000 It will be understated by $16,000 It will be overstated by $18,000

FINANCIAL ACCOUNTING
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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Sarah calculated her profit for the year ended 31 December 20X8 as $70,000. During the year she acquired a machine for $20,000 and she incorrectly expensed the entire amount. It is her policy to depreciate machine at a rate of 10% straight line. What will be the effect on her net asset as at 31 December 20X9? It will understated by $18,000 It will be overstated by $2,000 It will be understated by $16,000 It will be overstated by $18,000
Transcribed Image Text:Sarah calculated her profit for the year ended 31 December 20X8 as $70,000. During the year she acquired a machine for $20,000 and she incorrectly expensed the entire amount. It is her policy to depreciate machine at a rate of 10% straight line. What will be the effect on her net asset as at 31 December 20X9? It will understated by $18,000 It will be overstated by $2,000 It will be understated by $16,000 It will be overstated by $18,000
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