On 1/1/2018, ABC company purchased equipment costing $35, 000 where its useful life was 5 years and the salvage value was 55,000. ABC decided to use the straight-line method in calculating depreciation. In 2020, ABC found out that the accountant recorded wrongly $600 and 5900 for 2018 and 2019 respectively, instead of S6, 000 for each year, for depreciation. Equipment is depreciated for tax purposes using a straight-line method, with a tax rate of 40% The accounting entries in 31/12/2020 for the corrections are: Select one: a. All answers are false b. Accumulated depreciation $10,500 Cumulative effect of corrections of prior period errors $6, 300 Deferred tax Liabilities S4, 200 c. Cumulative effect of corrections of prior period errors $8, 400 Deferred tax Assets $2, 100 Accumulated depreciation $10, 500 Retained earnings S8, 400 Cumulative effect of correction of prior period error S8, 400 d. Cumulative effect of corrections of prior period errors S6, 300 Deferred tax Assets S4, 200 Accumulated depreciation S 10,500 e. Cumulative effect of corrections of prior period errors S6, 300 Deferred tax Assets 54,200 Accumulated depreciation $10,500 Retained earnings $6, 300 Cumulative effect of correction of prior period error $6, 300 f. Accumulated depreciation $10, 500 Cumulative effect of corrections of prior period errors S6, 300 Deferred tax Liabilities S4, 200 Cumulative effect of correction of prior period error 56, 300 Retained earnings $6, 300 g. Accumulated depreciation $10, 500 Retained earnings 56, 300 Deferred tax Assets 54. 200
On 1/1/2018, ABC company purchased equipment costing $35, 000 where its useful life was 5 years and the salvage value was 55,000. ABC decided to use the straight-line method in calculating
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