Question 1 (10 marks)

On 30 June 2019, the Accounting V.P. of XYZ Ltd. discovered accounting errors in the 2016 statements:

Land purchases of $330,000 on Jan. 1, 2016 had inadvertently been charged to equipment, a capital asset account, and had been depreciated by 15% for each year. The accounting depreciation rate is the same as the rate for tax purposes. The ending and beginning inventories had been properly stated.

XYZs income tax rate is 28% and has a December 31 year end.

Required:

a. Prepare general journal entries to record the correction of the above error.

Account Name: Calculations

Dr.

Cr.

b. Calculate the earnings correction that XYZ must show in the 2019 financial statements. Where will these amounts be disclosed?