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U2 Intermediate - E 11-21 In 2011 internal auditors...

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E 11-21 In 2011, internal auditors discovered that PKE Displays, Inc. had debited an expense account for the $350,000 cost of a machine purchased on January 1, 2008. The machine's life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Required: 1. Prpare the appropriate correcting entry assuming the error was discovered in 2011 before the adjusting and closing entries. (Ignore income taxes) 2. Assume the error was discovered in 2013 after the 2012 financial statements are issued. Prepare the appropriate correcting entry. Solution: Computatio n of the
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following SHOULD BE Requiremen t 1 Debit Credit Year Cost Dep. Exp Depreciatio n expense $ 70,000 2011 $ 350,000 $ 70,000 Accumulated depreciation $ 70,000 20 2013 $ 70,000 Requirement 2* 20 Retained earnings $ 140,000 2015 $ 70,000 Accumulated depreciation $ 140,000 *I assumed that closing of the books is 1 year hence, then no entry yet for depreciation expense E 11-24 General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured
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