The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,128,000. This cost included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge Total $1,920,000 38,000 28,000 142,000 $2,128,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020. In 2021, after the 2020 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment. Required: 1 & 2. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2021 and any 2021 journal entries related to the change in depreciation methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

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 14P: Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used...
icon
Related questions
Question
The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,128,000. This cost included
the following expenditures:
Purchase price
Freight charges
Installation charges
Annual maintenance charge
Total
$1,920,000
38,000
28,000
142,000
$2,128,000
The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance
method was used to determine depreciation expense for 2019 and 2020.
In 2021, after the 2020 financial statements were issued, the company decided to switch to the straight-line depreciation method for
this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year
of annual maintenance charges for the equipment.
Required:
1 & 2. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2021 and
any 2021 journal entries related to the change in depreciation methods. (If no entry is required for a transaction/event, select "No
journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)
Transcribed Image Text:The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,128,000. This cost included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge Total $1,920,000 38,000 28,000 142,000 $2,128,000 The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020. In 2021, after the 2020 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment. Required: 1 & 2. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2021 and any 2021 journal entries related to the change in depreciation methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
SWFT Essntl Tax Individ/Bus Entities 2020
SWFT Essntl Tax Individ/Bus Entities 2020
Accounting
ISBN:
9780357391266
Author:
Nellen
Publisher:
Cengage
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
SWFT Comprehensive Vol 2020
SWFT Comprehensive Vol 2020
Accounting
ISBN:
9780357391723
Author:
Maloney
Publisher:
Cengage
SWFT Comprehensive Volume 2019
SWFT Comprehensive Volume 2019
Accounting
ISBN:
9780357233306
Author:
Maloney
Publisher:
Cengage
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning