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SSC Financial and Cost Accounting P-1 QUESTION #6104
Question 1

Motor vehicles costing $530,000 were depreciated at 10% straight-line instead of the correct 25%. After incorrect entries: Motor vehicles at cost $530,000; Provision for depreciation $53,000. Which journal entries will correct the error?

  • Debit: Provision for depreciation $79,500 | Credit: Statement of profit or loss $79,500
  • Debit: Provision for depreciation $132,500 | Credit: Statement of profit or loss $132,500
  • Debit: Statement of profit or loss $79,500 | Credit: Provision for depreciation $79,500✔️
  • Debit: Statement of profit or loss $132,500 | Credit: Provision for depreciation $132,500
Correct Answer Explanation

Option C is correct.

Correct depreciation = $530,000 × 25% = $132,500

Already charged = $530,000 × 10% = $53,000

Additional needed = $132,500 − $53,000 = $79,500

Entry: Debit Statement of profit or loss $79,500 | Credit Provision for depreciation $79,500