Facts
(a) The internal auditor of Vigilant Inc. noticed in 200Y that in 200X the entity had omitted to record in its books of accounts an amortization expense amounting to $30,000 relating to an intangible asset.
(b) An extract from the income statement for the years ended December 31, 200X and 200Y, before correction of the error follows:
|
200Y |
200X |
|
|
Gross profit |
$300,000 |
$345,000 |
|
General and administrative expenses |
90,000 |
90,000 |
|
Selling and distribution expenses |
($30,000) |
($30,000) |
|
Amortization |
30,000 |
XXXX |
|
Net income before income taxes |
150,000 |
225,000 |
|
Income taxes |
30,000 |
45,000 |
|
Net profit |
120,000 |
180,000 |
(c) The “retained earnings” of Vigilant Inc. for 200X and 200Y before correction of the error are
|
200Y |
200X |
|
|
Retained earnings, beginning of the year |
$225,000 |
$45,000 |
|
Retained earnings, ending of the year |
375,000 |
225,000 |
(d) Vigilant Inc.’s income tax rate was 20% for both years.
Required
Present the accounting treatment prescribed by IAS 8 for the correction of the errors.