On January 1, 2012, Keller Company purchased and installed a telephone system at

Question

On January 1, 2012, Keller Company purchased and installed a telephone system at a cost of $20,000. The equipment was expected to last five years with a salvage value of $3,000. On January 1, 2013, more telephone equipment was purchased to tie-in with the current system for $10,000. The new equipment is expected to have a useful life of four years. Through an error, the new equipment was debited to Utilities Expense. Keller Company uses the straight-line method of depreciation.

Prepare a schedule showing the effects of the error on Utilities Expense, Depreciation Expense, and Net Income for each year and in total beginning in 2013 through the useful life of the new equipment. (If an amount is understated then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). If answer is zero please enter 0, do not leave any fields blank.)

Year Utilities Expense Depreciation Expense Net Income

Overstated (Understated) Overstated (Understated) Overstated (Understated)

2013

2014

2015

2016

Total

Explanation / Answer

Depreciaiton on new addition = 10,000 / 4 =$ 2500

utilities Depreciaition net Income 2013 10,000 O (2500) U (7500 ) U 2014 - (2500)U 2500 O 2015 (2500) U 2500 O 2016 (2500) U 2500 O Total 10,000 O 10,000 U 0

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