Please give me the right answer. Return to question In 2018, internal auditors d

Question

Please give me the right answer.

Return to question In 2018, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $365,000 cost of a machine purchased on January 1, 2015. The machine's useful life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, prepare the journal entry PKE will use to correct the error. (lf no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. No Event General Journal Debit Credit Equipment Cash 365,000 365,000 Prev 6 of 9 Next > rch 10:48 8/2/2

Explanation / Answer

2015 Equipment dr. 365000

cash cr. 365000

2015 expense dr. 73000 (365000/5)

accumulated depreciation cr. 73000

2016 Expense dr. 73000

accumulated deprecition cr. 73000

2017 Expense dr. 73000

accumulated depreciation cr. 73000

during the 3 year period depreciation expense was understated by 219000 (73000x3) but other expense were overstated by 365000. so net income during the period was understated by 146000 which means retained earnings is currently stated by that amount.

To correct inorrect accounts, entry will be -

Equipment dr. $ 365000

Accumulated depreciation cr. (73000x3) $ 219000

Retained earnings cr. (365000-219000) $146000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---