Air New Zealand (ANZ) is a Star Alliance member airline. Assume that early in 2014,
ANZ purchased equipment at a cost of $200,000 (NZ). Management expects the equipment to remain in service for four years and the estimated residual value to be negligible. ANZ uses the straight-line depreciation method. Through an accounting error, ANZ expensed the entire cost of the equipment at the time of purchase.
Requirement
Prepare a schedule to show the overstatement or understatement in the following items at the end of each year over the four-year life of the equipment. Ignore income taxes.
1. Total current assets
2. Equipment, net
3. Net income
4. Owners' equity