In 2021, it was discovered that a company had debited expense for the full cost of an asset purchased on January 1, 2018. The cost was $42 million with no expected residual value. Its useful life was 7 years and straight-line depreciation is used by the company. The correcting entry assuming the error was discovered in 2021 before the adjusting and closing entries includes: A debit to Equipment of $42 million A credit to Retained Earnings of $18 million A credit to Equipment of $18 million A debit to Retained Earnings of $24 million

In 2021, it was discovered that a company had debited expense for the full cost of an asset purchased on January 1, 2018. The cost was $42 million with no expected residual value. Its useful life was 7 years and straight-line depreciation is used by the company. The correcting entry assuming the error was discovered in 2021 before the adjusting and closing entries includes: A debit to Equipment of $42 million A credit to Retained Earnings of $18 million A credit to Equipment of $18 million A debit to Retained Earnings of $24 million

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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Question

In 2021, it was discovered that a company had debited expense for the full
cost of an asset purchased on January 1, 2018. The cost was $42 million with
no expected residual value. Its useful life was 7 years and straight-line
depreciation is used by the company. The correcting entry assuming the error
was discovered in 2021 before the adjusting and closing entries includes:
A debit to Equipment of $42 million
A credit to Retained Earnings of $18 million
A credit to Equipment of $18 million
A debit to Retained Earnings of $24 million

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