No depreciation until machinery is installed and ready for use Steps:

• Machinery costing $120,000 was acquired and added to assets, with$12,000 (10% × $120,000) depreciation charged to draft profit or loss.
• Installation cost of $40,000 paid indicates the asset was not yet in usable condition during the period, so depreciation should not be charged.
• Reverse the $12,000 depreciation expense, increasing profit by$12,000.
• Capitalize $40,000 installation (no profit impact) and expense$6,000 insurance (already correct).
• Revised profit = $50,000 +$12,000 = $62,000.

Why C is correct:

• IAS 16 requires depreciation to start when the asset is available for use; installation shows it was not, so reversing the erroneous $12,000 charge yields$62,000.

Why the others are wrong:

• A: Subtracts unneeded adjustment, like extra insurance.
• B: Ignores reversal of invalid depreciation.
• D: Reverses depreciation and incorrectly adds back insurance expense.

Final answer: C