Kentucky Enterprises purchased a machine on January 2, 2019, at a cost of P120,000. An additional P50,000 was spent for installation, but this amount was charged erroneously to repairs expense. The machine has a useful life of five years and a residual amount of P20,000. As a result of the error, O 2019 income was understated by P50,000. O Retained carnings at December 31, 2020, was understated by P30.000 and 2020 income was overstated by P10.00. O Retained earnings at December 31, 2020, was understated by P30,00 and 2020 income was overstated by P6.00O. O Retained earnings at December 31, 2020, was understated by P38,000 and 2020 incomc was overstated by P6.00.

Kentucky Enterprises purchased a machine on January 2, 2019, at a cost of P120,000. An additional P50,000 was spent for installation, but this amount was charged erroneously to repairs expense. The machine has a useful life of five years and a residual amount of P20,000. As a result of the error, O 2019 income was understated by P50,000. O Retained carnings at December 31, 2020, was understated by P30.000 and 2020 income was overstated by P10.00. O Retained earnings at December 31, 2020, was understated by P30,00 and 2020 income was overstated by P6.00O. O Retained earnings at December 31, 2020, was understated by P38,000 and 2020 incomc was overstated by P6.00.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 8P: Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of...

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Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
During 2019, White Company determined that machinery previously depreciated over a 7-year life had a total estimated useful life of only 5 years. An accounting change was made in 2019 to reflect the change in estimate. If the change had been made in 2018, accumulated depreciation at December 31, 2018, would have been 1,600,000 instead of 1,200,000. As a result of this change, the 2019 depreciation expense was 100,000 greater than it would have been if no change were made. Ignoring income tax considerations, what is the proper amount of the adjustment to Whites January 1, 2019, balance of retained earnings? a. 0 b. 100,000 c. 280,000 d. 400,000
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Ivanhoe Ltd. purchased a piece of equipment on January 1, 2019, for $1,275,000. At that time, it was estimated that the mad would have a 15-year life and no residual value. On December 31, 2023, Ivanhoe's controller found that the entry for depreciation expense was omitted in error in 2020. In addition, Ivanhoe planned to switch to double-declining-balance depreciation beca change in the pattern of benefits received, starting with the year 2023. Ivanhoe currently uses the straight-line method for depreciating equipment. Ivanhoe Ltd. follows IFRS.
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