West miller Construction Company purchased a new truck on December 31, 2017, for $48,000. The truck has
Question:
West miller Construction Company purchased a new truck on December 31, 2017, for $48,000. The truck has an estimated useful life of three years and an estimated salvage value of $12,000. When the truck was purchased, the company’s accountant mistakenly made the following entry:
Depreciation Expense (E, −RE) 48,000
Cash (−A) 48,000
Over the life of the truck, the company made no other entries associated with it.
REQUIRED:
a. What entry should West miller Construction Company have made on December 31, 2017?
b. Assuming that the straight-line method of depreciation should have been used and that the error was not discovered, in what direction and by how much was net income misstated in 2017 and 2018?
c. Assuming that the double-declining-balance method of depreciation should have been used and that the error was not discovered, in what direction and by how much was net income misstated in 2017 and 2018?
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
a Equipment A 48000 Cash A 48000 Purchased a truck b Depreciation Correct Per Books Depreciation Dif...View the full answer
