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In: Accounting

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 2 years ago
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