PRC-1 · Chapter 8 · Question 65 of 100
A manufacturing company received an invoice on 28 Feb 2026 for a machine upgrade of Rs. 25,500, which was mistakenly charged to maintenance. Machinery is depreciated at 25% p.a. straight-line, proportional. By what amount will the profit for the year to 30 June 2026 be understated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 23,375
Explanation
Reversing the maintenance expense adds 25,500 to profit. Recording the correct depreciation (25,500 * 25% * 4/12 = 2,125) reduces profit. Net understatement of profit = 25,500 - 2,125 = Rs. 23,375.
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