On January 1, 2019, Wildhorse Company purchased and installed a telephone system at a cost of$31,000. The equipment was expected to last five years with a salvage value of $4,500. On January 1,2020, more telephone equipment was purchased to tie-in with the current system for $16,000. Thenew equipment is expected to have a useful life of four years and no salvage value. Through an error,the new equipment was debited to Utilities Expense. Wildhorse Company uses the straight-linemethod of depreciation.Prepare a schedule showing the effects of the error on Utilities Expense, Depreciation Expense, andNet Income for each year and in total beginning in 2020 through the useful life of the new equipment.(If an amount is understated then enter with negative sign preceding the number e.g. -45 or parentheses e.g.(45). If answer is zero please enter O, do not leave any fields blank.)Year2020202120222023TotalUtilities ExpenseOverstated(Understated)LA$Depreciation ExpenseOverstated(Understated)LAtALANet IncomeOverstated(Understated)$

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Description: On January 1, 2019, Wildhorse Company purchased and installed a telephone system at a cost of$31,000. The equipment was expected to last five years with a salvage value of $4,500. On January 1,2020, more telephone equipment was purchased to tie-in w

Depreciation is a measure of wearing out of assets from its use efflux over time or obsolete through…

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On January 1, 2019, Wildhorse Company purchased and installed a telephone system at a cost of $31,000. The equipment was expected to last five years with a salvage value of $4,500. On January 1, 2020, more telephone equipment was purchased to tie-in with the current system for $16,000. The new equipment is expected to have a useful life of four years and no salvage value. Through an error, the new equipment was debited to Utilities Expense. Wildhorse Company uses the straight-line

On January 1, 2019, Wildhorse Company purchased and installed a telephone system at a cost of $31,000. The equipment was expected to last five years with a salvage value of $4,500. On January 1, 2020, more telephone equipment was purchased to tie-in with the current system for $16,000. The new equipment is expected to have a useful life of four years and no salvage value. Through an error, the new equipment was debited to Utilities Expense. Wildhorse Company uses the straight-line

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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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

On January 1, 2019, Wildhorse Company purchased and installed a telephone system at a cost of
$31,000. The equipment was expected to last five years with a salvage value of $4,500. On January 1,
2020, more telephone equipment was purchased to tie-in with the current system for $16,000. The
new equipment is expected to have a useful life of four years and no salvage value. Through an error,
the new equipment was debited to Utilities Expense. Wildhorse Company uses the straight-line
method of depreciation.
Prepare a schedule showing the effects of the error on Utilities Expense, Depreciation Expense, and
Net Income for each year and in total beginning in 2020 through the useful life of the new equipment.
(If an amount is understated then enter with negative sign preceding the number e.g. -45 or parentheses e.g.
(45). If answer is zero please enter O, do not leave any fields blank.)
Year
2020
2021
2022
2023
Total
Utilities Expense
Overstated
(Understated)
LA
$
Depreciation Expense
Overstated
(Understated)
LA
tA
LA
Net Income
Overstated
(Understated)
$

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