Brief Exercise 22-06 In 2020, Kingbird Corporation discovered that equipment purchased on January 1, 2018, for $57,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Kingbird uses straight-line depreciation. Prepare Kingbird's 2020 journal entry to correct the error. (Credit account titles are automatically Indented when amount is entered. Do not Indent manualy. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
Brief Exercise 22-06 In 2020, Kingbird Corporation discovered that equipment purchased on January 1, 2018, for $57,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Kingbird uses straight-line depreciation. Prepare Kingbird's 2020 journal entry to correct the error. (Credit account titles are automatically Indented when amount is entered. Do not Indent manualy. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Brlef Exercise 22-06
In 2020, Kingbird Corporation discovered that equipment purchased on January 1, 2018, for $57,000 was expensed at that time. The equipment should have been depreciated over 5
years, with no salvage value. The effective tax rate is 30%. Kingbird uses straight-line depreciation.
Prepare Kingbird's 2020 journal entry to correct the error. (CrediIt 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 enter0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Expert Solution
Step 1
From 2018 to 2020, Equipment has been used for 2 years.
In 2018, Equipment was expensed for 57,000 but now it should have been expensed for only $22,800 (2-year depreciation).
The overcharged expense also leads to less tax which was $17,100 (57,000*30%). Now tax liability occurs for 3 years life left for the equipment, ie $10,260 (17,100 * 3/5).
The balance would go the Retained Earnings, (it is a difference of increase in income as an expense of equipment has been reduced and decrease in income as expense of tax has been increased).
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education