George Young Industries (GYI) acquired industrial robots at the beginning of 201

Question

George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company's assembly process. During 2018, management became aware that the $1 million cost of the machinery was inadvertently recorded as repair expense on GYI's books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-ine method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows: 2015 2016 2017 2018 2019 2020 2021 2022 142,900 244,900 74,900 124,900 89,300 89,200 89,300 44,600 Totals $1,000,000 The tax rate is 40% for all years involved. Required 1& 3. Prepare any journal entry necessary as a direct result of the error and the adjusting entry for 2018 depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list

Explanation / Answer

1) Straight Line Depreciation = $1000,000 / 10 years = $100000

Correcting Entry :-

3) Journal Adjusting Entry :-

Year MACRS Deductions Straight Line Depreciation Difference Cumulative Difference Deferred Tax Liability 2015 $142900 $100000 $42900 $42900 $17160 2016 $244900 $100000 $144900 $187800 $75120 2017 $174900 $100000 $74900 $262700 $105080

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