Question 3 Part A Truthful plc is a company operating in the engineering sector. The company purchased an item of equipment on 2 January 20X1 at a cost of 100 000. When preparing the financial statements for the 20x2 financial year, it was discovered that the equipment purchased in January 20X1 was recorded as a repair expense. The retained earnings column of the draft statement of changes in equity of Truthful plc for the year ending 31 December 20X2 (with comparative figures for the year ending 31 December 20X1) is shown below. This draft was prepared before discovering the above-mentioned issue. TRUTHFUL PLC DRAFT STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 20X2 31 December 20X0 Retained earnings 104 000 19 000 (1 200) 121 800 125 000 (1 500) 45 300 Balance Profit for the period Dividends Balance Profit for the period Dividends Balance 31 December 20X1 31 December 20X2 The company provides for depreciation at 10% per annum on the straight-line basis with an estimated residual value of zero. Required a) Prepare the correcting journal entries in the accounting records of Truthful plc during the year ended 31 December 20X2 (5 marks) b) Prepare the retained earnings column of the statement of changes in equity of Truthful plc for the year ended 31 December 20X2. (Comparative figures are required) (6 marks) (Part A: 11 marks) Ignore tax and deferred tax