A company purchased a new computer for $4000 and a stack of writable CDs for $28. By accident the computer was recorded as a revenue expenditure and the stack was set up as a capital expenditure. Three months later depreciation for the year was calculated using the declining balance method (use 20% for all fixed assets). The net income for the year was $45000. Calculate what the correct net income would be.

That is a question from my exam review for my accounting exam tomorrow. My friends and I honestly, have no idea how to answer it. Any help would be much appreciated. I recently stumbled across this website on Google, looks pretty sweet. Thanks a lot.

Yes it is a pretty sweet website indeed.

Unfortunately, the site rules prohibit us giving you the answers to your homework or exam questions. Also please see the big red note at the top of the page as to where to post these questions.

That being said I will give you some hits:

The computer was fully expensed but should not have been.

The CD's were deprecated at 20% but should have been expensed.

First make those two adjustments. Than figure what the depreciation should have been on the computer. Once you find what the net effect of all this was, add (or subtract it from the net income).

If you want to post your answer and how you calculated it I will take a look at it for you.