Dyke Company's net incomes for the past three years are presented below: 2019 2018 2017 $480,000 $450,000 $360,000 During the 2019 year-end audit, the following items come to your attention: Dyke bought a truck on January 1, 2016 for $196,000 with a $16,000 estimated residual value and a six-year life. The company debited an expense account and credited cash on the purchase date for the entire cost of the asset. (Straight-line method) During 2019, Dyke changed from the straight-line method of depreciating its cement plant to the double-declining balance method. The following computations present depreciation on both bases: 2019 2018 2017 Straight-line 36,000 36,000 36,000 Double-declining 46,080 57,600 72,000 The net income for 2019 was computed using the double-declining balance method, on the January 1, 2019 book value, over the useful life remaining at that time. The depreciation recorded in 2019 was $72,000. Dyke, in reviewing its provision for uncollectibles during 2019, has determined that 1% is the appropriate amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2018 and 2019 when the expense had been $18,000 and $12,000, respectively. The company recorded bad debt expense under the new rate for 2019. The company would have recorded $6,000 less of bad debt expense on December 31, 2019 under the old rate. Instructions Prepare in general journal form the entry necessary to correct the books for the transaction in part 1 of this problem, assuming that the books have not been closed for the current year. Compute the net income to be reported each year 2017 through 2019.

Dyke Company's net incomes for the past three years are presented below: 2019 2018 2017 $480,000 $450,000 $360,000 During the 2019 year-end audit, the following items come to your attention: Dyke bought a truck on January 1, 2016 for $196,000 with a $16,000 estimated residual value and a six-year life. The company debited an expense account and credited cash on the purchase date for the entire cost of the asset. (Straight-line method) During 2019, Dyke changed from the straight-line method of depreciating its cement plant to the double-declining balance method. The following computations present depreciation on both bases: 2019 2018 2017 Straight-line 36,000 36,000 36,000 Double-declining 46,080 57,600 72,000 The net income for 2019 was computed using the double-declining balance method, on the January 1, 2019 book value, over the useful life remaining at that time. The depreciation recorded in 2019 was $72,000. Dyke, in reviewing its provision for uncollectibles during 2019, has determined that 1% is the appropriate amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2018 and 2019 when the expense had been $18,000 and $12,000, respectively. The company recorded bad debt expense under the new rate for 2019. The company would have recorded $6,000 less of bad debt expense on December 31, 2019 under the old rate. Instructions Prepare in general journal form the entry necessary to correct the books for the transaction in part 1 of this problem, assuming that the books have not been closed for the current year. Compute the net income to be reported each year 2017 through 2019.

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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Dyke Company's net incomes for the past three years are presented below:

2019 2018 2017

$480,000 $450,000 $360,000

During the 2019 year-end audit, the following items come to your attention:

Dyke bought a truck on January 1, 2016 for $196,000 with a $16,000 estimated residual value and a six-year life. The company debited an expense account and credited cash on the purchase date for the entire cost of the asset. (Straight-line method)
During 2019, Dyke changed from the straight-line method of depreciating its cement plant to the double-declining balance method. The following computations present depreciation on both bases:

2019 2018 2017

Straight-line 36,000 36,000 36,000

Double-declining 46,080 57,600 72,000

The net income for 2019 was computed using the double-declining balance method, on the January 1, 2019 book value, over the useful life remaining at that time. The depreciation recorded in 2019 was $72,000.

Dyke, in reviewing its provision for uncollectibles during 2019, has determined that 1% is the appropriate amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2018 and 2019 when the expense had been $18,000 and $12,000, respectively. The company recorded bad debt expense under the new rate for 2019. The company would have recorded $6,000 less of bad debt expense on December 31, 2019 under the old rate.

Instructions

Prepare in general journal form the entry necessary to correct the books for the transaction in part 1 of this problem, assuming that the books have not been closed for the current year.
Compute the net income to be reported each year 2017 through 2019.

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