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In: Accounting

In 2018, the internal auditors of KJI Manufacturing discovered the following material errors made in prior...

In 2018, the internal auditors of KJI Manufacturing discovered the following material errors made in prior years:
  

Equipment was purchased on June 30, 2016, for $140,000. The purchase was incorrectly recorded as a debit to repair and maintenance expense. The equipment has a useful life of five years and no residual value.

On March 31, 2017, $66,000 was paid to a contractor to landscape the area around a manufacturing plant including the installation of a sprinkler system. The expenditure was debited to the Land account. The landscaping is expected to have a 20-year useful life and no residual value.


KJI uses the straight-line method of depreciation for all depreciable assets.

Required:
1. Prepare the journal entries at December 31, 2018, to correct the errors (ignore income taxes).
2. Prepare the journal entries to record 2018 depreciation for any assets recorded in requirement 1.

Solutions

Expert Solution

Solution: Following are the required journal entries:

Date General Journal Debit($) Credit($)
June 30, 2016 Bank 140000

Repair and Maintenance Expense

(Being the wrong journal entry reversed)

 140000
June 30, 2016 Equipment 140000

Bank

(Being error rectified)

 140000
Dec. 31, 2016 Depreciation- Equipment[(140000/5)*(6/12)] 14000

Equipment

(Being depreciation charged for 6 months)

 14000
March 31, 2017 Bank 66000

Land

(Being the wrong journal entry reversed)

 66000
March 31, 2017 Landscaping

Bank

(Being error rectified)
Dec. 31, 2017 Depreciation-Equipment(140000/5) 28000

Equipment

(Being depreciation charged for the whole year)

 28000
Dec. 31, 2017 Depreciation-Landscaping[(66000/20)*(9/12)] 2475

Landscaping

(Being depreciation charged for 9 months)

 2475
Dec. 31, 2018 Depreciation-Equipment(140000/5) 28000

Equipment

(Being depreciation Charged for the whole year)

 28000
Dec. 31, 2018 Depreciation-Landscaping(66000/20) 3300

Landscaping

(Being depreciation charged for the whole year)

 3300

ekkarill92 answered 1 year ago
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