At the end of the 30 June 2023 financial year Yellow River Ltd obtained new information and made the decision to revise the useful life of an item of equipment acquired on 1 July 2020 for $100,000. The life was revised from being a total of 10 years to a total of 12 years. The asset is being, and will continue to be, depreciated on a straight-line basis with a residual value of $20,000. No depreciation has been provided so far in the current period.

REQUIRED:

(i) the journal entry for the change in accounting estimate (Narrations are required) (Show all workings) (2 marks); and 

(ii) assuming the effect is material, an appropriate supporting note to the accounts (3 marks).

During the preparation of the 2023 financial reports of Lim Ltd an error was identified. Unpaid rent was not accrued at the end of the 2022 financial year. An additional $10,000 rent expense should have been included in both the 2022 statement of comprehensive income and income tax return. The tax rate is 30%. 

REQUIRED: 

(i) the journal entry in 2023 to correct the error (Narration are required) (1 mark); and 

(il) assuming the effect is material, an appropriate supporting note to the accounts (3 marks).

Answer rating: 100% (QA)

Answer A i The journal entry for the change in accounting estimate is as follows Date Account Debit Credit 30062023 Depreciation Expense 5000 Accumulated Depreciation 5000 Narration To record the chan... View the full answer