Harbour Point Car Park has not yet dealt with the five matters listed below. Complete the table, stating for each one whether the profit now shown is overst...

Work each item in two steps: decide what has gone wrong in the ledger, then trace whether that makes an expense or the income too high or too low. Profit is income less expenses, so an expense that is too high makes profit too low, and income that is too high makes profit too high.

Why each effect follows:

1. The prepayment belongs to next year, so this year's expenses are $720 too high and profit is that much too low.
2. The attendant's work has been done, so the expense is $1,150 too low and profit is that much too high.
3. Capital expenditure has been treated as revenue expenditure, so expenses are $6,400 too high and profit is that much too low.
4. A private withdrawal has been treated as a business cost, so expenses are $900 too high and profit is that much too low.
5. The season ticket money has not yet been earned, so income is $1,800 too high and profit is that much too high.

The barrier row carries the largest sum and the biggest misconception. A new entrance barrier is a non-current asset, not a repair to an existing one, so only the annual depreciation should ever reach the income statement. Charging the whole $6,400 as repairs understates both this year's profit and the car park's non-current assets, and it leaves every later year's profit overstated because no depreciation is being charged on an asset the books no longer show.

Taken together the five corrections would raise profit by $720 + $6,400 + $900 = $8,020 and reduce it by $1,150 + $1,800 = $2,950, a net increase of $5,070.

Total .