In 2025, Headland Corporation discovered that equipment purchased on January 1, 2023, for $65,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Prepare Headland's 2025 journal entry to correct the error. Headland uses straight-line depreciation. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit Equipment Accumulated Depreciation-Equipment Deferred Tax Liability Retained Earnings To correct the error, Headland Corporation needs to adjust for the missed depreciation expense for 2023 and 2024 and the impact on retained earnings. The equipment was incorrectly expensed in 2023, so we must reverse the expense and record depreciation for the two years (2023 and 2024). Here's the breakdown: 1. Cost of Equipment: $62,000 2. Depreciation per year (straight-line): $62,000 ÷ 5 = $12,400/year 3. Total depreciation missed (2023 and 2024): $12,400 × 2 = $24,800 4. Tax effect on the adjustment: $24,800 × 30% = $7,440 Journal Entry for 2025 Account Titles and Explanation Equipment Accumulated Depreciation - Equipment Deferred Tax Liability Retained Earnings Debit Credit 62,000 24,800 7,440 29,760
In 2025, Headland Corporation discovered that equipment purchased on January 1, 2023, for $65,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Prepare Headland's 2025 journal entry to correct the error. Headland uses straight-line depreciation. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit Equipment Accumulated Depreciation-Equipment Deferred Tax Liability Retained Earnings To correct the error, Headland Corporation needs to adjust for the missed depreciation expense for 2023 and 2024 and the impact on retained earnings. The equipment was incorrectly expensed in 2023, so we must reverse the expense and record depreciation for the two years (2023 and 2024). Here's the breakdown: 1. Cost of Equipment: $62,000 2. Depreciation per year (straight-line): $62,000 ÷ 5 = $12,400/year 3. Total depreciation missed (2023 and 2024): $12,400 × 2 = $24,800 4. Tax effect on the adjustment: $24,800 × 30% = $7,440 Journal Entry for 2025 Account Titles and Explanation Equipment Accumulated Depreciation - Equipment Deferred Tax Liability Retained Earnings Debit Credit 62,000 24,800 7,440 29,760
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...
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the first example #3 and #4 are incorrcet. im submitting the problem again with blank boxes.
Transcribed Image Text:In 2025, Headland Corporation discovered that equipment purchased on January 1, 2023, for $65,000 was expensed at that time. The
equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%.
Prepare Headland's 2025 journal entry to correct the error. Headland uses straight-line depreciation. (Credit account titles are
automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter O for the amounts. List all debit entries before credit entries.)
Account Titles and Explanation
Debit
Credit
Equipment
Accumulated Depreciation-Equipment
Deferred Tax Liability
Retained Earnings
Transcribed Image Text:To correct the error, Headland Corporation needs to adjust for the missed depreciation expense for 2023 and
2024 and the impact on retained earnings. The equipment was incorrectly expensed in 2023, so we must
reverse the expense and record depreciation for the two years (2023 and 2024). Here's the breakdown:
1. Cost of Equipment: $62,000
2. Depreciation per year (straight-line): $62,000 ÷ 5 = $12,400/year
3. Total depreciation missed (2023 and 2024): $12,400 × 2 = $24,800
4. Tax effect on the adjustment: $24,800 × 30% = $7,440
Journal Entry for 2025
Account Titles and Explanation
Equipment
Accumulated Depreciation - Equipment
Deferred Tax Liability
Retained Earnings
Debit Credit
62,000
24,800
7,440
29,760
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