Question
In: Accounting
9. In 2018, internal auditors discovered that PKE Displays, Inc., had debited an expense account for...
9. In 2018, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $368,000 cost of equipment purchased on January 1, 2015. The equipment life was expected to be five years with no residual value. Straight-line depreciation is used by PKE.
Required:
1. Prepare the correcting entry assuming the error was discovered in 2018 before the adjusting and closing entries. (Ignore income taxes.) (If no entry is required, select "No journal entry required" in the first account field.)
Record the correcting entry for errors discovered.
| Event | General Journal | Debit | Credit |
| 1 | |||
Assume the error was discovered in 2020 after the 2019 financial statements are issued. Prepare the correcting entry. (If no entry is required, select "No journal entry required" in the first account field.)
| Event | General Journal | Debit | Credit |
Solutions
Expert Solution
SOLUTION
| Event | General Journal | Debit ($) | Credit ($) |
| 1. | Equipment | 368,000 | |
| Accumulated depreciation* (368,000/5*3) | 220,800 | ||
| Retained earnings | 147,200 | ||
| 2. | No journal entry required |
* Accumulated depreciation-
= Depreciation expense for 1 year * 3 years
= (368,000/5 years) * 3 years
= $220,800
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