George Young Industries (GYI) acquired industrial robots at the beginning of 201

Question

George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company’s assembly process. During 2018, management became aware that the $2.5 million cost of the machinery was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows:

The tax rate is 40% for all years involved.

Required:
1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting entry for 2018 depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the correcting entry.

2.Record the 2018 adjusting entry for depreciation.

Year MACRS
Deductions 2015 $ 357,250 2016 612,250 2017 437,250 2018 312,250 2019 223,250 2020 223,000 2021 223,250 2022 111,500 Totals $ 2,500,000

Explanation / Answer

Cost of the machinery    2,500,000.00 Life 10 Years Straight Line Depreciation        250,000.00 Straight Line Depreciation(2015,2016,2017)        750,000.00 Tax Depreciation    1,406,750.00 Excess Expenses Claimed    1,093,250.00 Tax on Excess Claim        437,300.00 Account Description Debit Credit 1 Assets    2,500,000.00 To Retained Earnings 2,500,000.00 2 Retained Earnings 750,000 To Accmulated Depreciation 750,000

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.