A purchase of machine tools by Jet Co. for $5,390 should have been capitalized as the tools have a 3 year life and an expected residual value of $770. However, Jet Co. erroneously charged the purchase to Repairs & Maintenance Expense. At year-end closing, Jet's bookkeeper noticed the error and made only one correcting entry resulting in Net Income and Total Assets to be understated: Dr Depreciation Expense $5,390/3 Cr Accumulated Depreciation $5,390/3 Required 1: Assuming you fixed all errors, what is the amount of depreciation expense Jet Co. must show on the year end income statement? $ Required 2: Assuming you fixed all errors, what is the amount for accumulated depreciation Jet Co. must show on the year end balance sheet? (type it as a positive number) $ Required 3: Assuming you fixed all errors, what net amount (i.e., cost net of accumulated depreciation) should Jet Co. show for tools on the year end balance sheet? $
A purchase of machine tools by Jet Co. for $5,390 should have been capitalized as the tools have a 3 year life and an expected residual value of $770. However, Jet Co. erroneously charged the purchase to Repairs & Maintenance Expense. At year-end closing, Jet's bookkeeper noticed the error and made only one correcting entry resulting in Net Income and Total Assets to be understated: Dr Depreciation Expense $5,390/3 Cr Accumulated Depreciation $5,390/3 Required 1: Assuming you fixed all errors, what is the amount of depreciation expense Jet Co. must show on the year end income statement? $ Required 2: Assuming you fixed all errors, what is the amount for accumulated depreciation Jet Co. must show on the year end balance sheet? (type it as a positive number) $ Required 3: Assuming you fixed all errors, what net amount (i.e., cost net of accumulated depreciation) should Jet Co. show for tools on the year end balance sheet? $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Transcribed Image Text:A purchase of machine tools by Jet Co. for $5,390 should have been capitalized as the tools have a 3 year life and an expected
residual value of $770. However, Jet Co. erroneously charged the purchase to Repairs & Maintenance Expense. At year-end closing,
Jet's bookkeeper noticed the error and made only one correcting entry resulting in Net Income and Total Assets to be understated:
Dr Depreciation Expense $5,390/3
Cr Accumulated Depreciation $5,390/3
Required 1: Assuming you fixed all errors, what is the amount of depreciation expense Jet Co. must show on the year end income
statement? $
Required 2: Assuming you fixed all errors, what is the amount for accumulated depreciation Jet Co. must show on the year end
balance sheet? (type it as a positive number) $
Required 3: Assuming you fixed all errors, what net amount (i.e., cost net of accumulated depreciation) should Jet Co. show for tools
on the year end balance sheet? $
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