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ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements

Marlow Co had profit for the year of $240,000 after charging all items below. Before finalising, the following are discovered: (1) a $30,000 revaluation surplus on land was credited to profit or loss; (2) a $12,000 loss on disposal of equipment was debited to the revaluation surplus instead of profit or loss. What is the corrected profit for the year, and total comprehensive income?

Corrected profit is $198,000 and total comprehensive income remains $240,000. The $30,000 revaluation surplus is removed from profit and moved to OCI, and the $12,000 disposal loss is charged to profit and reversed out of OCI, so the overall total is unchanged.

  1. AProfit $198,000; total comprehensive income $240,000Correct
  2. BProfit $258,000; total comprehensive income $240,000
  3. CProfit $198,000; total comprehensive income $198,000
  4. DProfit $210,000; total comprehensive income $240,000

Explanation

Remove the $30,000 surplus from profit: 240,000 - 30,000 = 210,000. Then charge the $12,000 disposal loss to profit: 210,000 - 12,000 = 198,000. The surplus moves to OCI (+30,000) and the loss is removed from OCI (+12,000 reversal, net of the error's effect), so total comprehensive income: 198,000 + 30,000 + 12,000 = 240,000, unchanged. $210,000 forgets the disposal loss.

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