linusite limited purchased a specialised machine on 1 January 2015 for N$10 000 000. linusite Limited provides for depreciation on the diminishing balance method at 20%. The following relates to an error made by linusite Limited

1. It processed depreciation of N$ 2 000 000 in both 2015 and 2016 (2 years) and N$ 1 200 000 in 2017.

2. The error was picked up in 2017 after the current periods entries had been processed.

The income tax is 30% and it has been unchanged for many periods. The tax authorities allow the annual deduction of 20% of the cost of the asset

Required:

Provide the correcting journal entries for the current year ended 31 December 2017 (10 marks)

(b) Using the information provided in (a) above but the error was as follows:

1. During the current year it was discovered that the specialised machinery purchased in 2017 had in fact been expensed as a special marketing fee instead.

2. The error affected the tax calculations and the forms submitted (that is the incorrect information was also submitted to the tax authorities).

The income tax rate is 30% and has been unchanged for many years The tax authorities allow annual deduction of 20% on the cost of the asset

Required

Prepare the correcting journal entries for the year ended 31 December 2017 assuming: (i) The tax authorities have indicated that they will re-open the relevant tax assessments (10 marks) (ii) The tax authorities have indicated that they will make the corrections in the current year assessment(i.e will not re-open the relevant prior tax assessments)