Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,094,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges. Annual maintenance charge Total $1,920,000 37,000 27,000 110,000 $2,094,000 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 2019 and 2020. In 2021, after the 2020 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 2021. 2. Ignoring income taxes, prepare any 2021 journal entry(s) related to the change in depreciation methods. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Ignoring income taxes, prepare any 2021 journal entry(s) related to the change in depreciation methods. (If ne transaction/event, select "No journal entry required" in the first account field.) View transaction list View Journal entry worksheet
Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,094,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges. Annual maintenance charge Total $1,920,000 37,000 27,000 110,000 $2,094,000 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 2019 and 2020. In 2021, after the 2020 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 2021. 2. Ignoring income taxes, prepare any 2021 journal entry(s) related to the change in depreciation methods. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Ignoring income taxes, prepare any 2021 journal entry(s) related to the change in depreciation methods. (If ne transaction/event, select "No journal entry required" in the first account field.) View transaction list View Journal entry worksheet
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 13P: Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended...
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Question
Transcribed Image Text:Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of
$2,094,000. This cost figure included the following expenditures:
Purchase price
Freight charges
Installation charges.
Annual maintenance charge
Total
$1,920,000
37,000
27,000
110,000
$2,094,000
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 2019 and 2020.
In 2021, after the 2020 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 2021.
2. Ignoring income taxes, prepare any 2021 journal entry(s) related to the change in depreciation
methods.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Ignoring income taxes, prepare any 2021 journal entry(s) related to the change in depreciation methods. (If ne
transaction/event, select "No journal entry required" in the first account field.)
View transaction list View Journal entry worksheet
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