Suggested solutions and answers: Applying IAS 8

Requirement 1:

Profit for 2015 $36,320Adjustmentsa. Interest receivable, 2014 (1,000) Interest receivable, 2015 2,250b. Repairs expense, 2014 8,000 Repairs expense, 2015 (10,200)c. Prepaid insurance, 2014 (450) Prepaid insurance, 2015 250d. Depreciation on office equipment (1,600)e. Reversal of amortization 1,200Adjusted profit for 2015 $34,770

Requirement 2:

Retained earnings, Jan 1, 2016 $66,600Adjustments:a. Interest receivable, 2015 2,250 b. Repairs expense, 2015 (10,200)c. Prepaid insurance, 2015 250d. Understated depreciation, 2014 (3,000)e. Capitalization of equipment 6,800f. Derecognition of R & D (4,200)Adjusted Retained Earnings $58,500

Requirement 3:

Date Particulars F Debit Credit2015Dec. 31

Interest receivable $ 2,250

Interest revenue $ 1,250 Retained earnings 1,000

Repairs expense 2,200Retained earnings 8,000 Repairs payable 10,200

Prepaid expense 250Insurance expense 200 Retained earnings 450

Retained earnings 3,000 Accumulated depreciation 3,000

Office equipment 10,000Depreciation expense 1,600 Accumulated depreciation 4,800 Retained earnings 6,800

Accumulated amortization 3,000Retained earnings 4,200 Amortization expense 1,200 Patent 6,000