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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