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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?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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?
Transcribed Image Text: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?
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