n error of $3,000 was found in the audit of depreciation expense of the warehouse purchased in January 2019. The management of Juventus have indicated that they do not wish to amend the financial statements. ii. An error of $350,000 in the valuation of work in progress was found as a number of the assumptions contain out of date information. The management of Juventus have indicated that they do not wish to amend the financial statements.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Profit before tax for Juventus is estimated at $3,000,000 for the year ended June 30, 2019, during the audit, the team has identified the following errors:
i. An error of $3,000 was found in the audit of
ii. An error of $350,000 in the valuation of work in progress was found as a number of the assumptions contain out of date information. The management of Juventus have indicated that they do not wish to amend
the financial statements.
Calculate Performance Materiality and utilize this to discuss the appropriate treatment of the above two errors.
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