Chapter 13, Problem 38P

Chem-Lite, Inc., maintains its accounts on the basis of a fiscal year ending March 31. At March 31, 20X1, the Equipment account in the general ledger appeared as shown below. The company uses straight-line depreciation, a 10-year life, and 10 percent salvage value for all its equipment. It is the company’s policy to take a full year’s depreciation on all additions to equipment occurring during the fiscal year, and you may treat this policy as a satisfactory one for the purpose of this problem. The company has recorded depreciation for the fiscal year ended March 31, 20X1.

  Upon further investigation, you find the following contract dated December 1, 20X0, covering the acquisition of equipment:

 Required:

Prepare in good form, including full explanations, the adjusting entry (entries) you would propose as auditor of Chem-Lite, Inc., with respect to the equipment and related depreciation accounts at March 31, 20X1. (Assume that all amounts given are material.)