Reference no: EM132950894

Problem - A foreign company's Plant and equipment are carried at cost. Depreciation expense is computed by the sum-of-years digits method. Plant and equipment, purchased two years ago, have an estimated life of four years. The net book value of plant and equipment is 28 million foreign currency units at the end of the second year since the plant and equipment were purchased. The net income is 25 million. Assume no income tax. Compute differences in depreciation expenses between the sum of-year digits and straight-line methods for the first and the second year and show adjusting entries to convert the first and second year financial statements from the sum of years digits to straight-line basis.