Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $2,116,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge $1,930,000 38,000 28,000 120,000 Total $2,116,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2016 and 2017. In 2018, after the 2017 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment. Required: 1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018. 2. Ignoring income taxes, prepare any 2018 journal entry(s) related to the change in depreciation methods. Required 1 Required 2 Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018. no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Event General Journal Debit Credit Retained earnings Accumulated depreciation Equipment 67,500 52,500 120,000
Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $2,116,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge $1,930,000 38,000 28,000 120,000 Total $2,116,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2016 and 2017. In 2018, after the 2017 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment. Required: 1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018. 2. Ignoring income taxes, prepare any 2018 journal entry(s) related to the change in depreciation methods. Required 1 Required 2 Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018. no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Event General Journal Debit Credit Retained earnings Accumulated depreciation Equipment 67,500 52,500 120,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
2. Ignoring income taxes, prepare any 2018
Transcribed Image Text:Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $2,116,000. This cost figure included
the following expenditures:
Purchase price
Freight charges
Installation charges
Annual maintenance charge
$1,930,000
38,000
28,000
120,000
Total
$2,116,000
The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance
method was used to determine depreciation expense for 2016 and 2017.
In 2018, after the 2017 financial statements were issued, the company decided to switch to the straight-line depreciation method for
this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year
of annual maintenance charges for the equipment.
Required:
1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018.
2. Ignoring income taxes, prepare any 2018 journal entry(s) related to the change in depreciation methods.
Transcribed Image Text:Required 1
Required 2
Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2018.
no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No
Event
General Journal
Debit
Credit
Retained earnings
Accumulated depreciation
Equipment
67,500
52,500
120,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
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