ExpertMedium2 marksShort Answer
ACCA · Question 19 · Preparing a trial balance
Section A
Draft net profit for the year is $45,000. The following errors are discovered:
- Closing inventory was undervalued by $3,000.
- Depreciation of $1,500 was omitted.
- A payment for rent of $1,000 was debited to the rent account as $100.
What is the revised net profit after correcting these errors? (Enter numbers only)
Section A
Draft net profit for the year is $45,000. The following errors are discovered:
- Closing inventory was undervalued by $3,000.
- Depreciation of $1,500 was omitted.
- A payment for rent of $1,000 was debited to the rent account as $100.
What is the revised net profit after correcting these errors? (Enter numbers only)
How to approach this question
Adjust the draft profit. Undervalued closing inventory means profit was understated (add it). Omitted depreciation means profit was overstated (subtract it). Understated rent expense means profit was overstated (subtract the difference).
Full Answer
Draft profit: $45,000.
1. Closing inventory undervalued by $3,000: Correction increases profit by $3,000.
2. Omitted depreciation: Correction decreases profit by $1,500.
3. Rent under-recorded by $900 ($1,000 - $100): Correction decreases profit by $900.
Revised profit = $45,000 + $3,000 - $1,500 - $900 = $45,600.
Common mistakes
Subtracting the inventory correction instead of adding it, or deducting the full $1,000 for rent instead of the $900 difference.
Practice the full ACCA FA — Financial Accounting Practice Exam 1
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