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 $1 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:

Year............. MACRS Deductions

2015.......................... $ 142,900

2016 ............................244,900

2017 ............................174,900

2018 ............................124,900

2019 .............................89,300

2020 .............................89,200

2021 .............................89,300

2022 .............................44,600

Totals .......................$1,000,000

The tax rate is 40% for all years involved.

Required:

1. Prepare any journal entry necessary as a direct result of the error described.

2. Briefly describe any other steps GYI would take to appropriately report the situation.

3. Prepare the adjusting entry for 2018 depreciation.