Provide the impact on earnings after taxes

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Question - The new controller of Delta Ltd. was in the process of preparing the financial statements for the period ended December 31, 2018. The new controller noted the following information from the prior years:

On January 01, 2016, the company purchased an equipment for $500,000. This equipment should have been amortized on a straight-line basis over 10 years, taking a full year's depreciation in the year of acquisition and assuming no residual value at the end of the equipment's life. However, the entire cost of the equipment was accidentally charged to 'Machine Repairs Expense' account. The Company reported net earnings BEFORE taxes of $1,500,000 and $1,100,000 for years 2016 and 2017, respectively. The company has a 30% income tax rate. (Assume that the accounting amortization rate is same as the CCA rate for tax purposes).

Required - Provide the impact on 'Earnings AFTER taxes' for the year ended December 31, 2016 and December 31, 2017 for Delta Ltd. (show your calculations).

Reference no: EM132839386

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