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    IAS 8 - Homework Questions

    Uploaded by

    Tseke
    The document contains 3 questions regarding accounting errors. Question 1 asks to fill in missing words in statements about accounting for changes in estimates versus changes in accounting policies. Question 2 asks to prepare a correction of error note for a machinery expense that was incorrectly expensed. Question 3 provides extracts from financial statements with errors and asks to disclose a corrected note describing the errors, and revised statements of comprehensive income and changes in equity. The errors relate to incorrect sales amounts resulting from faulty accounting software.

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    IAS 8 - Homework Questions

    Uploaded by

    Tseke
    45 views2 pages
    The document contains 3 questions regarding accounting errors. Question 1 asks to fill in missing words in statements about accounting for changes in estimates versus changes in accounting policies. Question 2 asks to prepare a correction of error note for a machinery expense that was incorrectly expensed. Question 3 provides extracts from financial statements with errors and asks to disclose a corrected note describing the errors, and revised statements of comprehensive income and changes in equity. The errors relate to incorrect sales amounts resulting from faulty accounting software.

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    The document contains 3 questions regarding accounting errors. Question 1 asks to fill in missing words in statements about accounting for changes in estimates versus changes in accounting policies. Question 2 asks to prepare a correction of error note for a machinery expense that was incorrectly expensed. Question 3 provides extracts from financial statements with errors and asks to disclose a corrected note describing the errors, and revised statements of comprehensive income and changes in equity. The errors relate to incorrect sales amounts resulting from faulty accounting software.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    45 views2 pages

    IAS 8 - Homework Questions

    Uploaded by

    Tseke
    The document contains 3 questions regarding accounting errors. Question 1 asks to fill in missing words in statements about accounting for changes in estimates versus changes in accounting policies. Question 2 asks to prepare a correction of error note for a machinery expense that was incorrectly expensed. Question 3 provides extracts from financial statements with errors and asks to disclose a corrected note describing the errors, and revised statements of comprehensive income and changes in equity. The errors relate to incorrect sales amounts resulting from faulty accounting software.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    QUESTION 1 (2 MARKS)

    Fill in the missing words:

    Changes in accounting estimates are accounted for ……………………….. whereas changes in


    accounting policies are accounted
    for……………………………………………………………………………

    QUESTION 2 (17 MARKS)

    Apple Ltd is a small company involved in tree-felling. During an annual review by a local firm of auditors
    at 31 December 20x6, it was discovered that a machine, which has been purchases on 2 January 20x3
    for R500 000 had been expensed as a rental expense. Depreciation on machinery is calculated at 10%
    per annum on the straight-line basis to a nil residual value.

    The bookkeeper has not yet corrected this error.

    The tax authorities allows the cost of machinery to be deducted over 4 years, apportioned for part of a
    year.

    The corporate tax rate is 28%.

    Required

    Prepare the correction of error note to the financial statements at 31 December 20x6. Comparative
    figures are not required. Indicate the financial years in the note

    Question 3 (20 marks)

    ABC (Pty) Ltd has a year ended the 30 June and the following extracts for the Statement of
    Comprehensive Income includes material errors which affect both the account receivable and sales
    amounts.

    ABC (PTY) Ltd Statement of Comprehensive Income for the year ended 30 June 2017

    2017 2016
    Rands Rands

    Net profit before tax 600 000 700 000

    Tax expense (current tax) (168 000) (196 000)

    Net income after tax 432 000 504 000

    Retained income opening balance 4 504 000 4 000 000

    Retained income closing balance 4 936 000 4 504 000


    This error has resulted from faulty accounting software used by the company which has resulted in
    either an over or under statement of credit sales as follows:

    2015 2016 2017


    Rands Rands Rand

    Incorrect sales 3 200 000 3 500 000 3 850 000

    Correct sales 3 900 000 3 200 000 3 900 000

    The following extracts are from the Statement of Financial Position before any corrections are made
    to the errors:

    2017 2016 2015


    Rands Rands Rands
    Accounts Receivable 640 000 700 000 770 000

    Income Tax liability 168 000 196 000 210 000

    Deferred Tax 23 000 45 000 5 600

    Retained Income 4 936 000 4 504 000 4 000 000

    The tax rate for companies is 28 % for the tax years 2015, 2016 and 2017. The South African Revenue
    Services has agreed to reopen all the tax assessments for the above errors. (Ignore VAT)

    You are required to:

    1 (a) Disclose the full note for the correction of the errors for the year ended 30 June 2017 under the
    following three components:

    o Correction of error description


    o Effect on the statement of comprehensive income
    o Effect on the statement of financial position

    (9 marks)

    1 (b) Disclose the revised Statement of Comprehensive Income for the year ended 30 June 2017 with
    comparatives (4 marks)

    1 (c) Disclose the revised Statement of Change in Equity for the year ended 30 June 2017 (7 marks)

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