The first audit of the books of Swift Limited was recently carried out for the year ended December 31, 2021. Swift follows IFRS. In examining the books, the auditor found that certain items had been overlooked or might have been incorrectly handled in the past: 1. At the beginning of 2019, the company purchased a machine for $480,000 (residual value of $30,000) that had a useful life of six years. The bookkeeper used straight-line depreciation but failed to deduct the residual value in calculating the depreciation base for the three years. 2. Swift purchased another company early in 2017 and recorded goodwill of $450,000 Swift amortized $20,000 of goodwill in 2017, and $40,000 in each subsequent year. The tax treatment for goodwill was properly applied. Assuming the company has a tax rate of 20% Instructions a. Prepare the journal entries in 2021 to correct the books where necessary, assuming that the 2021 books have not been closed. b. Identify the type of change for each of the items.

The first audit of the books of Swift Limited was recently carried out for the year ended December 31, 2021. Swift follows IFRS. In examining the books, the auditor found that certain items had been overlooked or might have been incorrectly handled in the past: 1. At the beginning of 2019, the company purchased a machine for $480,000 (residual value of $30,000) that had a useful life of six years. The bookkeeper used straight-line depreciation but failed to deduct the residual value in calculating the depreciation base for the three years. 2. Swift purchased another company early in 2017 and recorded goodwill of $450,000 Swift amortized $20,000 of goodwill in 2017, and $40,000 in each subsequent year. The tax treatment for goodwill was properly applied. Assuming the company has a tax rate of 20% Instructions a. Prepare the journal entries in 2021 to correct the books where necessary, assuming that the 2021 books have not been closed. b. Identify the type of change for each of the items.

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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