In 2014, Bailey Corporation discovered that equipment purchased on January 1, 20
ID: 2553690 • Letter: I
Question
In 2014, Bailey Corporation discovered that equipment purchased on January 1, 2012, for $50,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Prepare Bailey's 2014 journal entry to correct the error.
Equipment .......................................................................................... 50,000
Accumulated Depreciation--Equipment................................................................ 20,000
Deferred Tax Liability............................................................................................... 9,000
Retained Earnings.................................................................................................... 21,000
($20,000 = $50,000 X 2/5; $9,000 = $30,000 X 30%)
In 2014, Bailey Corporation discovered that equipment purchased on January 1, 2012, for $50,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Prepare Bailey's 2014 journal entry to correct the error.
Equipment .......................................................................................... 50,000
Accumulated Depreciation--Equipment................................................................ 20,000
Deferred Tax Liability............................................................................................... 9,000
Retained Earnings.................................................................................................... 21,000
($20,000 = $50,000 X 2/5; $9,000 = $30,000 X 30%)
Explanation / Answer
Entries given in the question is correct as per me. Please let me know in case you need any explanation.
Equipment (debit).......................................................................................... 50,000
Accumulated Depreciation--Equipment (Credit)................................................................ 20,000
Deferred Tax Liability (Credit)............................................................................................... 9,000
Retained Earnings (Credit).................................................................................................... 21,000
($20,000 = $50,000 X 2/5; $9,000 = $30,000 X 30%)
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