Financial Accounting
A business purchased a motor car on 2003.7.1 for $20,000.It is to ba depriciated at 20% per year on the straight line basis,asumming a residual value at the end of 5 years of $4,000,with a proportionate depreciation charge in the year of purchase.
The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles repairs account.
How will the business profit for the year ended 2003.12.31 be affected by the error?
A understated by $18,400
B understated by $16,800
C overstated by $18,400