Need assistance with Q16, details please! (c) Correction of an error 016. Quigle

Question

Need assistance with Q16, details please!
(c) Correction of an error 016. Quigley Co. bought a machine on January 1, 2013 for $1,400,000. It had a $120,000 estimated residual value and a ten-year life. An expense account was debited on the purchase date. Quigley uses straight-line depreciation. This was discovered in 2015 Tax rate is 40% The 2015 Beginning Retained Earnings Balance was $11,555,111 Instructions- Prepare the entry or entries related to the machine for 2015. Also, show the impact on beginning Retained Earnings.

Explanation / Answer

It was discovered in 2015 that it was wrongly charged to expenses Deprecitaion is on SLM basis=(1400000-120000)/10 128000 So for 2 years 128000*2 $256,000 Cost of machine 1400000 Now in 2013 it was charged to purchase 1400000 so decrease in net income 1400000 Therefore decrease in Retained earnings 1400000 Now in 2015 If it would have been corretly debited to machine account Than depreciation expene till 2015 $256,000 So net Effect on retained earnings (1400000-256000) $1,144,000 Ans Dr Cr Equipment $1,400,000 Retained earnings $1,144,000 Accumulated Depreciation-Equipment $256,000 (Being entry corrected and booked to machiner account) Depreciation Expense $128,000 Accumulated Depreciation-Equipment $128,000 (being deprecitaion expenses for the year) Difference in retained Earnings Opening balance on jan 2015 11555111 Less: Adjustment $1,144,000 Corrected Retained earnings balance $10,411,111

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.