At the end of fiscal year 2023, PepsiCo's accounting department discovered that they had incorrectly recorded a $2.3 million equipment purchase as an operating expense rather than capitalizing it as a fixed asset. The equipment, purchased on January 1, 2023, has an estimated useful life of 5 years with no salvage value. The company uses straight-line depreciation for all its equipment and follows GAAP standards. Upon discovery of this error on December 31, 2023, the accounting team needs to make the necessary adjusting entries to correct the books. What is the impact of this error on PepsiCo's financial statements, and what correcting journal entries should be made to fix this mistake (consider both the asset recording and the year's depreciation)? What would be the net effect on PepsiCo's 2023 net income after making these corrections?

At the end of fiscal year 2023, PepsiCo's accounting department discovered that they had incorrectly recorded a $2.3 million equipment purchase as an operating expense rather than capitalizing it as a fixed asset. The equipment, purchased on January 1, 2023, has an estimated useful life of 5 years with no salvage value. The company uses straight-line depreciation for all its equipment and follows GAAP standards. Upon discovery of this error on December 31, 2023, the accounting team needs to make the necessary adjusting entries to correct the books. What is the impact of this error on PepsiCo's financial statements, and what correcting journal entries should be made to fix this mistake (consider both the asset recording and the year's depreciation)? What would be the net effect on PepsiCo's 2023 net income after making these corrections?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 5MC: During 2019, White Company determined that machinery previously depreciated over a 7-year life had a...

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