In 2014, Bailey Corporation discovered that equipment purchased on January 1, 20

Question

In 2014, Bailey Corporation discovered that equipment purchased on January 1, 2012, for $34,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 29%.

Prepare Bailey’s 2014 journal entry to correct the error. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Answer:

Equipment . .................................................. 34,000

            To Accumulated Depreciation A/C ($34,000/5 X 2) . ............... 13,600

            To Deferred Tax Liability A/C ($20,400 X 29%) . ....................... 5,916

             To Retained Earnings A/C ($20,400 $5,916) . ...................... 14,484

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