In March 2019, Dempo Org purchased production equipment valued at $640,000. In 2021, auditors discovered that half of the value of the equipment had been originally expensed in 2019. At the time of acquisition, the equipment was expected to last 8 years, with no salvage value. Dempo uses straight-line depreciation for this type of asset and follows a policy of recording a full year of depreciation in the year of acquisition. Dempo's tax rate is 28%. Required: Calculate the retrospective adjustment required and provide the appropriate journal entry to record this adjustment. Calculate the correct amount of depreciation for 2021 and provide the year-end entry.
In March 2019, Dempo Org purchased production equipment valued at $640,000. In 2021, auditors discovered that half of the value of the equipment had been originally expensed in 2019. At the time of acquisition, the equipment was expected to last 8 years, with no salvage value. Dempo uses straight-line depreciation for this type of asset and follows a policy of recording a full year of depreciation in the year of acquisition. Dempo's tax rate is 28%. Required: Calculate the retrospective adjustment required and provide the appropriate journal entry to record this adjustment. Calculate the correct amount of depreciation for 2021 and provide the year-end entry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In March 2019, Dempo Org purchased production equipment valued at $640,000. In 2021, auditors discovered that half of the value of the equipment had been originally expensed in 2019. At the time of acquisition, the equipment was expected to last 8 years, with no salvage value. Dempo uses straight-line
Required:
- Calculate the retrospective adjustment required and provide the appropriate
journal entry to record this adjustment. - Calculate the correct amount of depreciation for 2021 and provide the year-end entry.
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