Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $1,902,000....

Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $1,902,000. This cost figure included the following expenditures:


Purchase price	$	1,760,000
Freight charges		21,000
Installation charges		11,000
Annual maintenance charge		110,000
Total	$	1,902,000

The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2016 and 2017.

In 2018, after the 2017 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company’s controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment.

Required:

1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018.
2. Ignoring income taxes, prepare any 2018 journal entry(s) related to the change in depreciation methods.

Solutions

Expert Solution

Above figures have been calculated in the following manner:

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $1,974,000....

Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $1,974,000. This cost figure included the following expenditures: Purchase price $ 1,820,000 Freight charges 27,000 Installation charges 17,000 Annual maintenance charge 110,000 Total $ 1,974,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2016 and 2017. In 2018, after the 2017 financial statements were issued, the company decided...

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of...

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,200,000. This cost included the following expenditures: Purchase price $ 1,960,000 Freight charges 42,000 Installation charges 32,000 Annual maintenance charge 166,000 Total $ 2,200,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020. In 2021, after the 2020 financial statements were issued, the company decided...

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of...

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,308,000. This cost included the following expenditures: Purchase price $ 2,020,000 Freight charges 48,000 Installation charges 38,000 Annual maintenance charge 202,000 Total $ 2,308,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020. In 2021, after the 2020 financial statements were issued, the company decided...

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of...

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,344,000. This cost included the following expenditures: Purchase price $ 2,040,000 Freight charges 50,000 Installation charges 40,000 Annual maintenance charge 214,000 Total $ 2,344,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020. In 2021, after the 2020 financial statements were issued, the company decided...

Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,072,000....

Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,072,000. This cost figure included the following expenditures: Purchase price $ 1,910,000 Freight charges 36,000 Installation charges 26,000 Annual maintenance charge 100,000 Total $ 2,072,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020. In 2021, after the 2020 financial statements were issued, the company decided...

Collins Corporation purchased office equipment at the beginning of 2011 and capitalized a cost of $1,972,000....

Collins Corporation purchased office equipment at the beginning of 2011 and capitalized a cost of $1,972,000. This cost figure included the following expenditures: Purchase price $ 1,810,000 Freight charges 26,000 Installation charges 16,000 Annual maintenance charge 120,000 Total $ 1,972,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2011 and 2012. REQUIRED: 1. Ignoring taxes, prepare the appropriate correcting entry for the equipment...

The Earland Corporation purchased equipment at the beginning of 20x7 and capitalized a cost of $2,000,000....

The Earland Corporation purchased equipment at the beginning of 20x7 and capitalized a cost of $2,000,000. This cost included the following expenditures: Purchase price $1,850,000 Freight charges 30,000 Installation charges 20,000 Annual maintenance charge 100,000 Total=$2,000,000 The company equipment is being depreciated at a diminishing balance rate of 15% with no residual value. In 20x9, after the 20x8 financial statements were issued, the company decided to switch to the straight-line method of depreciation to reflect a change in the expected...

Boston Corp. purchased equipment with a cost of $70,000 at the beginning of 2016. The equipment...

Boston Corp. purchased equipment with a cost of $70,000 at the beginning of 2016. The equipment has an estimated life of 25 years or 25,000 units of product. The estimated residual value is $7,500. During 2016, 1,100 units of product were produced with this machinery. Determine the following: a. Amount of total accumulated depreciation at December 31, 2016, using units-of-production depreciation. $ b. Book value at the end of 2016 using straight-line depreciation. $ c. A company may choose units-of-production...

Alteran Corporation purchased office equipment for $1.7 million at the beginning of 2019. The equipment is...

Alteran Corporation purchased office equipment for $1.7 million at the beginning of 2019. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $800,000. At the beginning of 2021 (two years later), Alteran decided to change to the straight-line depreciation method for this equipment. Prepare the journal entry to record depreciation for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account...

Alteran Corporation purchased office equipment for $1.9 million at the beginning of 2019. The equipment is...

Alteran Corporation purchased office equipment for $1.9 million at the beginning of 2019. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $400,000. At the beginning of 2021 (two years later), Alteran decided to change to the straight-line depreciation method for this equipment. Required: Prepare the journal entry to record depreciation for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first...

Subjects