Correction of errors — practice question

On 30 September 2020, the directors of DW Limited supplied the following figures. 6% debentures (2028) $18000 Bank overdraft $6450 Dividend paid $2000 General reserve at 1 October 2019 $6500 Inventory at 30 September 2020 $26300 Issued share capital at 1 October 2019 $200000 Non-current assets at 30 September 2020: Cost $462000, Provision for depreciation $106000 Other payables $2200 Other receivables $1600 Provision for doubtful debts at 1 October 2019 $625 Retained earnings $73475 Trade payables $8250 Trade receivables $14500 Extra information A draft income statement for the year ended 30 September 2020 had been drawn up and showed a profit of $84900. The following mistakes were then found. 1 Inventory of $26300 included items valued at cost $5200 that required repairs. After repairs costing $600, those items could be sold for $5000. 2 Operating expenses contained insurance of $400 that had been prepaid at 30 September 2020. 3 The provision for doubtful debts should have been revised so that it is equal to 5% of trade receivables. The directors chose to transfer $5000 to general reserve. Issued share capital did not change during the year ended 30 September 2020.