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Prepare the journal entries for corrections on the book

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Reference no: EM133175234

Question - The first audit of the books of swift Inc was recently carried out of the year ended December 31 2021. Swift follows IFRS. In examining the books. The auditor found out that certain items have been overlooked or have been incorrectly entered in the past.

1. At the beginning of 2019, the company purchased a machine for $486,000(residual value of $36,000) that had a useful life of 6 years. The bookkeeper  used straight line method for depreciation but failed to detect the residual value in calculating the depreciation for 3 years.

2. Swift purchased another company in early 2017 and recognized a goodwill of $500,000. Swift amortized $35,000 of goodwill in 2017 and $70,000 in each subsequent year. The tax treatment for goodwill was properly applied.

Assuming the company has tax rate of 35%.

Required -

a. Prepare the journal entries in 2021 for corrections on the book where necessary, assuming that the 2021 book have not been closed.

b. Identify the type of changes for each of the items.

Reference no: EM133175234

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