1. 2. 3. 4. 5. At the beginning of 2019, the company purchased a machine for $483,000 (salvage value of $48,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. At the end of 2020, the company failed to accrue sales salaries of $41,000. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $82,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $82,000 to a loss account in 2021. Riverbed Company purchased a copyright from another company early in 2019 for $50,000. Riverbed had not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years. In 2021, the company wrote off $93,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings. Prepare the journal entries necessary in 2021 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no
1. 2. 3. 4. 5. At the beginning of 2019, the company purchased a machine for $483,000 (salvage value of $48,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. At the end of 2020, the company failed to accrue sales salaries of $41,000. A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional $82,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was considered remote, and charged the $82,000 to a loss account in 2021. Riverbed Company purchased a copyright from another company early in 2019 for $50,000. Riverbed had not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years. In 2021, the company wrote off $93,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings. Prepare the journal entries necessary in 2021 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Question
Ef 390.
Transcribed Image Text:The first audit of the books of Riverbed Company was made for the year ended December 31, 2021. In examining the books, the
auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are:
1.
1.
2.
2.
3.
4.
3.
5.
No. Account Titles and Explanation
4.
At the beginning of 2019, the company purchased a machine for $483,000 (salvage value of $48,300) that had a useful life of
6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation
base for the 3 years.
At the end of 2020, the company failed to accrue sales salaries of $41,000.
A tax lawsuit that involved the year 2019 was settled late in 2021. It was determined that the company owed an additional
$82,000 in taxes related to 2019. The company did not record a liability in 2019 or 2020 because the possibility of loss was
considered remote, and charged the $82,000 to a loss account in 2021.
Riverbed Company purchased a copyright from another company early in 2019 for $50,000. Riverbed had not amortized the
copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years.
Prepare the journal entries necessary in 2021 to correct the books, assuming that the books have not been closed. Disregard effects of
corrections on income tax. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, eg, 1250.)
5.
In 2021, the company wrote off $93,000 of inventory considered to be obsolete; this loss was charged directly to Retained
Earnings.
Accumulated Depreciation-Machinery
Depreciation Expense
Retained Earnings
Retained Earnings
Salaries and Wages Expense
No Entry
No Entry
Amortization Expense
Retained Earnings
Copyrights
Loss Due to Market Decline of Inventory
Retained Earnings
Debit
Credit
10000
0
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