In 2025, Ivanhoe Company discovered an error while preparing its 2025 financial statements. A building constructed at the beginning of 2024 costing $1350000 has not been depreciated. The estimated useful life of the building is 30 years with no salvage value. Straight-line depreciation is used. Ivanhoe properly included depreciation on its return also using straight-line depreciation. Income tax payable was also reported correctly at a tax rate of 20%, Income before depreciation expense in 2025 was $450000. What is the appropriate journal entry to record the prior period adjustment? O Retained Earnings Accumulated Depreciation Retained Earnings Accumulated Depreciation Retained Earnings Deferred Tax Asset Accumulated Depreciation Retained Earnings Deferred Tax Liability Accumulated Depreciation 45000 b 36000 36000 9000 45000 45000 36000 45000 9000 36000

In 2025, Ivanhoe Company discovered an error while preparing its 2025 financial statements. A building constructed at the beginning of 2024 costing $1350000 has not been depreciated. The estimated useful life of the building is 30 years with no salvage value. Straight-line depreciation is used. Ivanhoe properly included depreciation on its return also using straight-line depreciation. Income tax payable was also reported correctly at a tax rate of 20%, Income before depreciation expense in 2025 was $450000. What is the appropriate journal entry to record the prior period adjustment? O Retained Earnings Accumulated Depreciation Retained Earnings Accumulated Depreciation Retained Earnings Deferred Tax Asset Accumulated Depreciation Retained Earnings Deferred Tax Liability Accumulated Depreciation 45000 b 36000 36000 9000 45000 45000 36000 45000 9000 36000

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 66P: At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been...

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At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2015 when it should have been treated as a cost of production equipment installation costs. As a result of the misclassification, the depreciation through 2018 was understated by 110,000, and depreciation for 2019 was understated by 90,000. What would be the consequences of correcting for the misclassification of the property cost? a. The taxpayer uses the FIFO inventory method, and 25% of goods produced during the period were included in the ending inventory. b. The taxpayer uses the LIFO inventory method, and no new LIFO layer was added during 2019.
In 2025, Sandhill Company discovered an error while preparing its 2025 financial statements. A building constructed at the beginning of 2024 costing $1299900 has not been depreciated. The estimated useful life of the building is 30 years with no salvage value. Straight-line depreciation is used. Sandhill properly included depreciation on its tax return also using straight-line depreciation. Income tax payable was also reported correctly at a tax rate of 20%. Income before depreciation expense in 2025 was $400000. What was the impact on the following accounts at the start of 2025? Accumulated Depreciation was understated by $86660 and Retained Earnings was overstated by $34664. O Accumulated Depreciation was understated by $43330 and Retained Earnings was overstated by $34664. O Accumulated Depreciation was overstated by $43330 and net income was understated by $43330. O Accumulated Depreciation was understated by $43330 and net income was overstated by $43330.
In 2025, Ivanhoe Company discovered an error while preparing its financial statements. A building constructed at the beginning of 2024 costing $1350000 has not been depreciated. The estimated useful life of the building is 30 years with no salvage value. Straight- line depreciation is used. Ivanhoe also used straight-line depreciation for tax purposes and properly included depreciation on its tax return. Income tax payable was also reported correctly at a tax rate of 20%. Income before tax and depreciation expenses in 2025 was $450000 What would be the 2025 net income if depreciation had been recorded properly? $324000 O $414000 Ⓒ$405000 $450000 eTextbook and Media
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