4 Meowster is a retailer that sells a single pet product. The company has prepared its financial statements for the most recent financial year end. Part 1 The following information relates to Mewoster's store computer as at the most recent financial year end: Date of acquisition: three years ago Cost: $1,000 Residual value: none Useful life: 5 years, equivalent to an annual depreciation rate of 20% In the first two years of the store computer's useful life, this asset was depreicated using the straight-line depreciation method as required by the company's accounting policy. However, an error occurred in the third year, and the depreciation of the computer for the most recent financial year (i.e. the third year in the asset's useful life) was erroneously recognised using the reducing balance method at the same depreciation rate of 20% as indicated under the straight-line method. Required Calculate the following amounts in the current year. Show full workings. (a) Depreciation recognised using the reducing balance method. (b) Depreciation recognised using the straight-line method. (c) Find the required adjustment to the profit to correct the error in the recognition of depreciation. |