At the beginning of 2018, ABC Corporation had discovered that the depreciation e

Question

At the beginning of 2018, ABC Corporation had discovered that the depreciation expense in the years prior to 2018 was incorrectly calculated and recorded. For the years before 2018, total depreciation expense of $165,000 was recorded, whereas correct total depreciation expense was $75,000. The tax rate is 30%. ABC follows IFRS and the deferred taxes method of accounting for income taxes.

Required:
1) Prepare ABC’s 2017 journal entry with respect to the depreciation expense that was recorded in the years prior to 2018.

Explanation / Answer

Year Accounts Title and Explanation Debit Credit 2017 (Prior to year 2018) Depreciation Expenses $165000 Accumulated Depreciation $165000 (Depreciation of Rs. 165000 was recorded)

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