In 2014, Bailey Corporation discovered that equipment purchased on January 1, 2012, for $50,000 was expensed...

In 2014, Bailey Corporation discovered that equipment purchased on January 1, 2012, for $50,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Prepare Bailey's 2014 journal entry to correct the error.

Equipment .......................................................................................... 50,000

Accumulated Depreciation--Equipment................................................................ 20,000

Deferred Tax Liability............................................................................................... 9,000

Retained Earnings.................................................................................................... 21,000

($20,000 = $50,000 X 2/5; $9,000 = $30,000 X 30%)

Solutions

Expert Solution

Entries given in the question is correct as per me. Please let me know in case you need any explanation.

Equipment (debit).......................................................................................... 50,000

Accumulated Depreciation--Equipment (Credit)................................................................ 20,000

Deferred Tax Liability (Credit)............................................................................................... 9,000

Retained Earnings (Credit).................................................................................................... 21,000

($20,000 = $50,000 X 2/5; $9,000 = $30,000 X 30%)

ekkarill92 answered 9 months ago

Next > < Previous

Related Solutions

On January 1, 2012, Bushong Company purchased equipment at a cost of $12,600. The equipment had...

On January 1, 2012, Bushong Company purchased equipment at a cost of $12,600. The equipment had an estimated useful life of 6 years or 30,000 hours. The equipment will have a $1,200 salvage value at the end of its life. The equipment was used 6,500 hours in 2012. The depreciation expense for the year ending December 31, 2012, using the units-of-production method would be:

On January 1, 2014, Stark Company purchased equipment for a total cost of $155,000. The equipment...

On January 1, 2014, Stark Company purchased equipment for a total cost of $155,000. The equipment had an estimated useful life of 7 years and an estimated residual value of $43,000. Straight-line depreciation was used. On September 1, 2020, Stark Company disposes of the equipment. Required: Prepare the journal entry to record the disposition on September 1, 2020 assuming the equipment was sold for $39,000 cash. Prepare the journal entry to record the disposition on September 1, 2020 assuming the...

On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over...

On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $430,000 and will incur cash outflows of $322,000...

Perriot's Restaurant purchased kitchen equipment on January 1, 2014. The value of the kitchen equipment decreases...

Perriot's Restaurant purchased kitchen equipment on January 1, 2014. The value of the kitchen equipment decreases by 15% every year. On January 1, 2016, the value was $14,450. a) Find an exponential model for the value, V, of the equipment, in dollars, t years after January 1, 2016. b) What is the rate of change in the value of the equipment on January 1, 2016? c) What was the original value of the equipment on January 1, 2014? d) How...

[10] XYZ, Inc. purchased equipment Jan. 1, 2012. The cost was $500,000. Salvage value was $50,000...

[10] XYZ, Inc. purchased equipment Jan. 1, 2012. The cost was $500,000. Salvage value was $50,000 and the useful life was 5 years. The company decided to depreciate the equipment using the straight line method. After three years of depreciating the equipment and three years of maintaining the equipment very well, the company realized that the original estimates were too aggressive. The company estimated that the equipment should last another five years (eight years in total) and salvage value will...

1. On January 1, 2014, Fishbone Corporation (an equipment manufacturer) sold equipment to Lost Company that...

1. On January 1, 2014, Fishbone Corporation (an equipment manufacturer) sold equipment to Lost Company that cost $150,000. Fishbone received as consideration a down payment of $100,000 and a $240,000 note, (which includes accrued interest @ 5%), due on December 31, 2016. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%. Record the 1/1/14 transaction for Fishbone Corporation and all necessary entries from 2014-2016. Record the 1/1/14 transaction for Lost Company and...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of 5 years and an estimated residual value of $5,000. Assume the equipment was sold on April 30th 2017 for $25,000 Prepare journal entries for the following: A) Calculate depreciation expense for 2015 and 2016 using straight line method of depreciation. Prepare the journal entry to record depreciation B) Calculate depreciation for 2017 and record the journal entry C) Prepare the journal entry for the...

8. On January 1, 2014, Fishbone Corporation (an equipment manufacturer) sold equipment to Lost Company that...

8. On January 1, 2014, Fishbone Corporation (an equipment manufacturer) sold equipment to Lost Company that cost $150,000. Fishbone received as consideration a 5% interest-bearing note requiring payments of $80,000 annually for 3 years. The first note payment is to be made on December 31, 2014. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%.

On January 1, 2014, Pronghorn Company purchased a building and equipment that have the following useful...

On January 1, 2014, Pronghorn Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $46,800 salvage value, $762,400 cost Equipment, 12-year estimated useful life, $10,000 salvage value, $101,800 cost The building has been depreciated under the double-declining-balance method through 2017. In 2018, the company decided to switch to the straight-line method of depreciation. Pronghorn also decided to change the total useful life of the equipment to 9 years,...

Exercise 14-6 The following information is available for Bailey Company for 2014: 1. On January 2,...

Exercise 14-6 The following information is available for Bailey Company for 2014: 1. On January 2, 2014, Bailey paid property taxes amounting to $56,000 on its plant and equipment for the calendar year 2014. In late March 2014 Bailey made major repairs to its machinery amounting to $70,500. These repairs will benefit the remainder of the calendar year’s operations. 2. An inventory loss of $164,000 from market decline occurred in August 2014. Bailey recorded this loss in August 2014 after...

Subjects