Journal entry to correct recording error. A firm acquired equipment on January 1, Year 12 for $20,000. The equipment has an expected useful life of 5 years and zero salvage value. The firm recorded the acquisition by debiting Retained Earnings (Equipment Expense) and crediting Cash for $20,000. Give the journal entries that the firm must make on December 31. Year 12 to correct its initial recording error and any related effects (ignore income tax effects).

EXERCISES