Journal entries to correct accounting errors. Give correcting entries tor the following situations. In each case, the tinn uses the straight-line method of depreciation and closes its books annual!) on December 31. Recognize all gains and losses currently.

a. A firm purchased a computer tor S3.000 on Januan. 1. Year 3. It depreciated the computer at a rate of 25 percent of acquisition cost per year. On June 30. Year 5. it sold the computer tor S8(X) and acquired a new computer for S4.000. The bookkeeper made the following entry to record the transaction:

Equipment (Asset Increase) 3,200 Cash (Asset Decrease) 3,200

b. A firm purchased a used truck for $7,000. Its cost, when new, was SI 2.000. The bookkeeper made the following entry to record the purchase:

Truck (Asset Increase) 12,000 Accumulated Depreciation (Asset Decrease) 5,000 Cash (Asset Decrease) 7,000

c. A firm purchased a testing mechanism on April 1 , Year 6, for S 1 .200. It depreciated the testing mechanism at a 10 percent annual rate. A burglar stole the testing mechanism on June 30. Year 8. The firm had not insured against this theft. The bookkeeper made the following entry:

Retained Earnings (Theft Loss) (Shareholders' Equity Decrease) 1,200 Testing Mechanism (Asset Decrease) 1,200