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Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $1,936,000. This cost figure included the following expenditures: Purchase price $ 1,780,000 Freight charges 23,000 Installation charges 13,000 Annual maintenance charge 120,000 Total $ 1,936,000 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 2022 and 2023. In 2024, after the 2023 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: Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2024. Ignoring income taxes, prepare any 2024 journal entry(s) related to the change in depreciation methods.

Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $1,936,000. This cost figure included the following expenditures: Purchase price $ 1,780,000 Freight charges 23,000 Installation charges 13,000 Annual maintenance charge 120,000 Total $ 1,936,000 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 2022 and 2023. In 2024, after the 2023 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: Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2024. Ignoring income taxes, prepare any 2024 journal entry(s) related to the change in depreciation methods.

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 80.6C
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Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $1,936,000. This cost figure included the following expenditures:

Purchase price $ 1,780,000
Freight charges 23,000
Installation charges 13,000
Annual maintenance charge 120,000
Total $ 1,936,000

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 2022 and 2023.

In 2024, after the 2023 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. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2024.
  2. Ignoring income taxes, prepare any 2024 journal entry(s) related to the change in depreciation methods.

 

 

Journal entry worksheet Record the correcting entry for the equipment capitalization error discovered in 2024. Note: Enter debits before credits. Transaction 1 Record entry View transaction list General Journal Journal entry worksheet < 1 2 Note: Enter debits before credits. Transaction Clear entry Record entry Record the entry related to the change in depreciation method. Required 1 Ignoring income taxes, prepare any 2024 journal entry(s) related to the change in depreciation methods. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. General Journal Clear entry Debit Credit Debit View general journal Required 2 > Credit View general journal > >
Transcribed Image Text:Journal entry worksheet Record the correcting entry for the equipment capitalization error discovered in 2024. Note: Enter debits before credits. Transaction 1 Record entry View transaction list General Journal Journal entry worksheet < 1 2 Note: Enter debits before credits. Transaction Clear entry Record entry Record the entry related to the change in depreciation method. Required 1 Ignoring income taxes, prepare any 2024 journal entry(s) related to the change in depreciation methods. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. General Journal Clear entry Debit Credit Debit View general journal Required 2 > Credit View general journal > >
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