After the financial statements for 2018 have been prepared, Namib Limited changed its method of
depreciating machinery. The previous pattern of depreciation differed from the actual pattern of
economic benefits derived from the depreciable assets. As a result, the reducing balance method at
20% will be applied in future instead of the straight line method over five years as in the past.
A summary of the machinery account at 30 June 2017, the previous financial year end of the company is as follows:
No machinery has been purchased or disposed of during the year ended 30 June 2018
(Ignore all tax implications)
a) Calculate the following amounts resulting from the change in accounting estimates for inclusion in the financial statements of Namib Limited for the year ended 30 June 2018
i) Depreciation for the current year (3 marks)
ii) Depreciation for 2019 and 2020 (4 marks)
(b) Journalise all necessary adjustments to account for the change in accounting estimate in 2018
(c) Assume the amounts involved in the change in accounting estimate to be material, and disclose
these in terms of the requirements of International financial reporting standards (IFRS) accounting
policy notes are not required.
Leave an answer