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White pic purchased machinery on 1 January 20X7 at a cost of 1 000 000. The company policy is to provide depreciation on the reducing
White pic purchased machinery on 1 January 20X7 at a cost of 1 000 000. The company policy is to provide depreciation on the reducing balance method at 20% per annum. During the year ended 31 December 20x9, it was realised that depreciation had been calculated since acquisition an the straight-line method at 20% per annum. The estimated residual value is zero. The effect of the error on the opening balance of retained earnings for the comparative year (20x8) is: Select one: 0 a. Depreciation understated and therefore retained earnings overstated by 200 000 O b. Depreciation overstated and therefore retained earnings understated by E40 000 c. Depreciation and therefore retained earnings not affected d. Depreciation overstated and therefore retained earnings understated by 200 000 e. Depreciation understated and therefore retained earnings overstated by E40 000
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